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From 1 July 2015, foreign purchasers of residential property are liable to pay an amount of duty in addition to the general land transfer duty.

If you buy or acquire any land in Victoria and the transfer is dated on or after 1 July 2017, you must use our digital duties form. This form must be completed for all land acquisitions, even if the transaction is exempt from duty, the purchaser is not a foreign purchaser or the property is not residential property.

All vendor and purchaser representatives must be registered for Duties Online (DOL) to process the digital duties form. Alternatively, self-representative parties must register and lodge via the SRO public system.

For transfers dated before 1 July, you may complete and lodge a Form 62 Purchaser Statement. 

General questions

  1. Who is a foreign purchaser?
  2. How is the total duty payable calculated when a foreign purchaser buys residential property?
  3. How is additional duty calculated if an exemption applies?
  4. How is additional duty calculated if a concession applies?
  5. What is the date of the contract - the date the vendor signs the contract or the date the purchaser signs the contract?
  6. Does the additional duty apply to the GST-inclusive purchase price?
  7. Does the SRO require the Form 62 Purchaser Statement for the all transactions and transfers?
  8. How does the additional duty apply where there are multiple transferees to a transaction?
  9. Does the additional duty apply to contracts entered into prior to 1 July 2015 that complete after 1 July 2015?
  10. What is the rate of additional duty?

Nominations and sub-sales

  1. Will additional duty apply in a sub-sale transaction where the contract and the nomination were both executed before 1 July 2015?
  2. Will additional duty apply where a foreign purchaser is nominated under a contract for the sale of residential property entered into before 1 July 2015 and the nomination is executed on or after 1 July 2015?
  3. What rate of additional duty applies where a foreign purchaser is nominated under a contract for sale of residential property entered into on or after 1 July 2015 but before 1 July 2016 and the nomination is executed on or after 1 July 2016?

Residency

  1. Does additional duty apply to a New Zealand citizen with a Subclass 444 Visa who is currently working overseas?
  2. Does a person have to attach a copy of their passport to their transfer documents when submitting to the SRO?
  3. If a person has applied for, but not yet been advised they are entitled to, a visa within the meaning of s30(1) of the Migration Act 1958 (Cth), is that person still a foreign natural person?
  4. If a foreign natural person buy a residential property together with an Australian-owned corporation, how is additional duty calculated?

Residential property

  1. If a property is capable of being used for both residential and commercial purposes, is that property residential property and subject to additional duty?
  2. Is a foreign purchaser able to claim a refund of additional duty where that additional duty is paid because of a change of intended use to residential premises but the residential premises are never constructed?
  3. When does the amended definition of residential property commence?

Exemptions and concessions

  1. Does a foreign purchaser who qualifies for the first home buyer (FHB) duty exemption or concession have to pay the FPAD?
  2. How is additional duty calculated in these circumstances?
  3. What about a foreign purchaser who qualifies for the FHB duty reduction?
  4. How is additional duty calculated in these circumstances?
  5. Can a foreign purchaser be entitled to the principal place of residence (PPR) concession?
  6. Can a pensioner (who is an Australian citizen) claim a concession when they purchase a property with a foreign purchaser?
  7. How is additional duty calculated when a property is purchased off-the-plan?
  8. What is the dutiable value on which the additional duty will be charged if a foreign purchaser entered into a contract for a house and land package for $500,000 (for example, comprising land for $300,000 and house for $200,000)?
  9. If a couple owns a property in Victoria, and due to a breakdown of marriage, the property is transferred from one spouse/domestic partner to the other according to a financial agreement, will the spouse/domestic partner receiving the property be liable to additional duty if they are a foreign person?

Change of intent

  1. What if a foreign purchaser buys non-residential property and later decides to convert the property into residential property?
  2. Which rate of additional duty applies in respect of a contract that was entered into prior to 1 July 2016 for non-residential property where the transferee decides to turn the property into residential property after 1 July 2016

Landholder acquisitions

  1. How does additional duty apply to landholder acquisitions?
  2. Is there any additinal duty on a disposal of shares in a landholder by a foreign person?
  3. How is the total amount of duty payable calculated where there is a relevant acquisition in a landholder that holds both residential and non-residential property?

Discretion

  1. How do you apply for an exemption from additional duty?

Charge on the land for unpaid additional duty

  1. When does unpaid duty become a charge on the land?
  2. Why does unpaid duty need to be a first charge on the land?
  3. Will the SRO seek to enforce the charge if the foreign owner transfers the property to another person?

General questions

1. Who is a foreign purchaser?

A foreign purchaser is a transferee who is a foreign natural person, a foreign corporation or a trustee of a foreign trust.

2. How is the total duty payable calculated when a foreign purchaser buys residential property?

Calculating the total amount of duty involves three steps:

  1. Calculate the land transfer duty payable in the usual way, applying any relevant concessions.

  2. Calculate additional duty at the applicable rate on the dutiable value of the property (prior to the application of any concession).

  3. Add the land transfer duty payable to the additional duty payable for the total duty amount payable on the transfer.

3. How is additional duty calculated if an exemption applies?

If a duty exemption applies, no additional duty is payable.

4. How is additional duty calculated if a concession applies?

Duty is calculated following the three-step approach in Q1. The concession is only applied to the calculation of the land transfer duty amount in step 1.

5. What is the date of the contract - the date the vendor signs the contract or the date the purchaser signs the contract?

Both parties have to agree to form a contract so the contract comes into existence (or is “entered into”) on the final signature.

6. Does the additional duty apply to the GST-inclusive purchase price?

Yes. The additional duty is payable on the dutiable value of the property acquired (the greater of the price paid under the contract or the market value) before any concessions are applied.

Where GST is payable, it forms part of the consideration paid for the transfer.

7. Does the SRO require the Form 62 Purchaser Statement for all transactions and transfers?

Yes. The purchaser statement needs to be completed by every transferee in respect of each dutiable transaction. It must be completed even if the transaction is exempt from duty, the purchaser is not a foreign purchaser or the property is not residential property. For example, the purchaser statement must be completed for:

  • Spouse transactions, 
  • Transactions involving commercial properties, 
  • Transfers made pursuant to a will, 
  • Transfers to charities, and
  • Transactions involving farming properties (with Form 12 and Form 13)

For contracts or transfers dated on or after 1 July 2017 this information will be completed in the digital duties form.  

8. How does the additional duty apply where there are multiple transferees to a transaction?

The additional duty is charged on the residential property transferred to each transferee who is a foreign purchaser under a transaction.

Example A:

Don, Liam and Emily jointly purchase a residential property in Melbourne for $600,000. The contract to purchase the property was entered into on 1 July 2016. Emily is a foreign purchaser and all three take equal shares in the property. There are no applicable concessions.

Step 1:

The land transfer duty payable is $31,070

Step 2:

The additional duty is payable on Emily’s one-third share in the property; the dutiable value of which is $200,000 ($600,000/3). The additional duty payable is therefore $14,000 ($200,000 × 7%).

Step 3:

The total duty payable on the transfer is $45,070 ($31,070 + $14,000).

9. Does the additional duty apply to contracts entered into prior to 1 July 2015 that complete after 1 July 2015?

The additional duty applies to contracts, agreements or arrangements entered into on or after 1 July 2015. If the contract, agreement or arrangement was entered into before 1 July 2015, then the transaction is not subject to the additional duty even if the settlement date was after 1 July 2015, subject to the answer to Q12.

10. What is the rate of additional duty?

For contracts entered into on or after 1 July 2015 but before 1 July 2016, the rate of additional duty is 3% even if the settlement date is on or after 1 July 2016.

A rate of 7% applies to contracts, transactions, agreements and arrangements entered into on or after 1 July 2016.

Nominations and sub-sales

11. Will additional duty apply in a sub-sale transaction where the contract and the nomination were both executed before 1 July 2015?

Additional duty will not apply where both the contract and nomination were executed before 1 July 2015 even if the transfer takes place on or after 1 July 2015.

12. Will additional duty apply where a foreign purchaser is nominated under a contract for the sale of residential property entered into before 1 July 2015 and the nomination is executed on or after 1 July 2015?

Where a contract of sale was executed before 1 July 2015 but the nomination was executed on or after 1 July 2015, that nomination will be subject to additional duty if the transaction involves a sub-sale trigger event (that is, additional consideration or land development).

Where a person is nominated to take a transfer under an off-the-plan contract, this arrangement will trigger a sub-sale event (as there has been land development). In this situation, land transfer duty is generally only charged on the transfer to the nominated person.

Therefore, where a foreign purchaser is nominated to take a transfer of residential property under an off-the-plan contract and that nomination occurs on or after 1 July 2015, additional duty will apply.

13. What rate of additional duty applies where a foreign purchaser is nominated under a contract for the sale of residential property entered into on or after 1 July 2015 but before 1 July 2016 and the nomination is executed on or after 1 July 2016?

Where a contract of sale was executed on or after 1 July 2015 but before 1 July 2016 and the nomination was executed on or after 1 July 2016, that nomination will be subject to the additional duty if the transaction involves a sub-sale trigger event (that is, additional consideration or land development).

Where a person is nominated to take a transfer under an off-the-plan contract, this arrangement will trigger a sub-sale event (as there has been land development). In this situation, land transfer duty is generally only charged on the transfer to the nominated person.

Therefore, where a foreign purchaser is nominated to take a transfer of residential property under an off-the-plan contract and that nomination occurs on or after 1 July 2016, the rate of 7% will apply.

Residency

14. Does additional duty apply to a New Zealand citizen with a Subclass 444 Visa who is currently working overseas?

If the New Zealand citizen has a valid Subclass 444 visa at the day of settlement, the additional duty will not apply to them.

Please note:

  • Some visas cease when the visa holder leaves Australia, even for a short period of time. 
  • Th eSRO is not involved with visa requirement matters. If you are unsure about your visa status, you should contact the Department of Immigration and Border Protection

15. Does a person have to attach a copy of their passport to their transfer documents when submitting to the SRO?

No. The evidentiary documentation required is listed in the relevant transfer forms, including the Form 62 Purchaser Statement. If we require further information, we will request it.

16. If a person has applied for, but not yet been advised they are entitled to, a visa within the meaning of s30(1) of the Migration Act 1958 (Cth), is that person still a foreign natural person?

Yes. A person remains a foreign natural person until the necessary visa has been granted to the person.

17. If a foreign natural person buys a residential property together with an Australian-owned corporation, how is additional duty calculated?

Where a foreign natural person purchases residential property with an Australian-owned corporation, additional duty is payable only on the share of the property acquired by the foreign purchaser.

Residential property

18. If a property is capable of being used for both residential and commercial purposes, is that property residential property and subject to additional duty?

The property must be capable of being used solely or primarily for residential purposes to be residential property. Whether the property is residential property will turn on the facts of the matter, and will be considered on a case-by-case basis.

19. Is a foreign purchaser able to claim a refund of additional duty where that additional duty is paid because of a change of intended use to residential premises but the residential premises are never constructed?

No. The provisions do not provide for a refund in this circumstance.

20. When does the amended definition of residential property commence?

The amended definition of residential property commences from 1 July 2016 so if a contract was entered into before 1 July 2016, the definition of residential property prior to the amendment must be considered to determine whether or not the property is residential property.

Exemptions and concessions

21. Does a foreign purchaser who qualifies for the first-home buyer (FHB) duty exemption or concession have to pay FPAD?

Note: The FHB duty exemption/concession is only available to a foreign purchaser if the foreign purchaser buys the property together with an Australian citizen or permanent resident under a contract entered into on or after 1 July 2017.

If a transfer involving a foreign purchaser is eligible for the FHB exemption, no FPAD will be payable for the transfer.

If any duty is payable on the transfer, including under the FHB duty concession, then FPAD is payable in respect to the share in the property acquired by the foreign purchaser.

22. How is additional duty calculated in these circumstances?

Duty is calculated following the three-step approach in Q2. The FHB concession will only apply to reduce the land transfer duty amount that is payable. It will not apply to the additional duty amount, which is calculated on the full dutiable value (usually the contract price of the property) prior to any concessions applying in proportion to the foreign purchaser’s share in the property.

Example B:

Kate is a foreign natural person and jointly purchases a residential property in Melbourne for $700,000 with Mark, an Australian citizen. The contract to purchase the property was entered into on 2 July 2017. They each have a 50% share in the property. It is their first home and they are eligible to receive the FHB concession.

The concession applies to the full purchase price of $700,000. Here, the total land transfer duty amount after applying the concession is $24,713.

As Kate is a foreign natural person, additional duty is payable on the half share of the property she acquired ($700,000 x 50% x 7% = $24,500).

The total duty payable for the transfer of the property is $49,213 ($24,713 + $24,500).

23. What about a foreign purchaser who qualifies for the FHB duty reduction?

Note: The FHB duty reduction is only available for contracts entered into before 1 July 2017.

As this is a reduction in duty, not an exemption, FPAD is payable. 

24. How is additional duty calculated in these circumstances?

Duty is calculated following the three-step approach in Q2. As with the duty concession, the FHB duty reduction will only apply to reduce the land transfer duty amount that is payable. It will not apply to the additional duty amount, which is calculated on the full dutiable value (usually the contract price of the property) prior to any concessions applying in proportion to the foreign purchaser’s share in the property.

Example C:

Aya is a foreign natural person and jointly purchases a residential property in Melbourne for $500,000 with Frank, an Australian citizen. The contract to purchase the property was entered into on 1 July 2016. They each have a 50% share in the property. It is their first home and they are eligible to receive the FHB duty reduction.

The FHB duty reduction is a 50% duty reduction and applies to the full purchase price of $500,000. Here, the total land transfer duty amount, after applying the FHB duty reduction of 50%, is $10,985.

As Aya is a foreign natural person, additional duty is payable on the half share of the property he acquired ($500,000 x 50% x 7% = $17,500).

The total duty payable for the transfer of the property is $28,485 ($10,985 + $17,500).

25. Can a foreign purchaser be entitled to the principal place of residence (PPR) concession?

Yes. A foreign purchaser may be eligible to receive the PPR concession if they meet all the relevant criteria. The PPR concession will only apply to the land transfer duty amount. The additional duty will be calculated on the full dutiable value of the property (the greater of the contract price and the market value of the property) before the application of any concessions.

Example C:

Mary is a foreign natural person and has purchased an apartment for $400,000. She intends to reside in the apartment and so is eligible for the PPR concession. The contact to purchase the apartment was entered into on 1 July 2016.

The PPR concession duty rate applies to the purchase price of $400,000 so the land transfer duty amount equates to $16,370.

As Mary is a foreign natural person she is also subject to the additional duty. The 7% is calculated on the contract price of $400,000 prior to the application of the PPR concession. The amount of the additional duty is $28,000 ($400,000 x 7%).

Therefore, the total duty payable for the transfer is $44,370 ($28,000 + $16,370).

26. Can a pensioner (who is an Australian citizen) claim a concession when they purchase a property with a foreign purchaser?

Yes. The pensioner concession/exemption will apply in respect of the share in the property the pensioner acquired.

The share in the property transferred to the foreign purchaser will be assessed at the land transfer duty rate.

In addition, the transfer will also be subject to additional duty which will be calculated on the full dutiable value of the share in the property that is transferred to the foreign purchaser.

Example E:

Martin and Jane are husband and wife. Martin is a foreign natural person whilst Jane is an Australian citizen. Martin and Jane have purchased a property in Melbourne in which they intend to reside for $800,000, with each obtaining a 50% share in the property. The contract to purchase the property was entered into on 1 July 2016.

Jane is a pensioner and therefore eligible for duty relief whilst Martin is not.

The total duty payable in respect of the property can be calculated in four steps:

Step 1:

As an eligible pensioner, Jane qualifies for the pensioner concession on her 50% share in the property (which equates to $400,000). As a result, the general transfer duty amount for Jane’s 50% share is $5645.

Step 2:

The dutiable value of the property is $800,000 which at the land transfer duty rate amounts to a liability of $43,070. However, as Martin is receiving a 50% interest in the property, his land transfer duty amount is $21,535 ($43,070 x 50%).

Step 3:

As Martin is a foreign purchaser, he is also subject to the additional duty on the proportion of his share of the property. As Martin purchased a 50% interest in the property the additional duty is $28,000 ($800,000 x 50% x 7%).

Step 4:

The total duty liability for the transfer of the property is $55,180 ($5645 + $21,535 + $28,000).

27. How is additional duty calculated when a property is purchased off-the-plan?

Note: The off-the-plan duty concession is only available for contracts entered into on or after 1 July 2017 for properties acquired by owner/occupiers who are eligible for the principal place of residence or first home buyer duty concessions. This means the concession will no longer be available for residential investment property purchases or commercial property purchases from that date. 

Where the off-the-plan concession is available, additional duty is calculated on the contract price with no deduction on the consideration paid for construction occurring after the date of the contract. The off-the-plan concession still applies when calculating the amount of land transfer duty payable.

Example F:

Sarah, a foreign natural person, entered into a contract on 1 July 2016 to buy an apartment in Melbourne off-the-plan for $500,000. The off-the-plan concession reduces the dutiable value of the apartment to $300,000.

Therefore, land transfer duty is payable on the reduced dutiable value of $300,000. This equals $13,070.

As Sarah is a foreign purchaser, she is also subject to the additional amount of duty. This is calculated on the dutiable value of $500,000 (that is, the dutiable value of the property prior to the application of the off-the-plan concession). The amount of the additional duty is $35,000 ($500,000 x 7%).

The total amount of duty payable by Sarah is $48,070 ($13,070 + $35,000).

28. What is the dutiable value on which the additional duty will be charged if a foreign purchaser entered into a contract for a house and land package for $500,000 (comprising land for $300,000 and house for $200,000)?

Additional duty will be charged on the dutiable value of the property before the application of any concession. In this example, additional duty will be charged on $500,000.

29. If a couple owns a property in Victoria, and due to a breakdown of marriage, the property is transferred from one spouse/domestic partner to the other according to a financial agreement, will the spouse/domestic partner receiving the property be liable to additional duty if they are a foreign person?

All current exemptions from land transfer duty will also apply to the additional duty.

Section 44 of the Duties Act 2000 exempts certain transactions made solely because of the breakdown of a marriage or domestic relationship. Where s44 applies to exempt a transaction from land transfer duty, the additional duty will not apply.

Change of intent

30. What if foreign purchaser buys non-residential property and later decides to convert the property into residential property?

The foreign purchaser will be required to pay FPAD in relation to the property within 30 days of forming the intention to convert the property into residential property. FPAD will be calculated on the dutiable value of the property at the time it was transferred to teh foreign purchaser. The foreign purchaser must advise the SRO in writing of their intention to convert the property into residential property within 14 days of forming that intention.

31. Which rate of additional duty applies in respect of a contract that was entered into on or after 1 July 2015 but before 1 July 2016 for non-residential property where the transferee decides to convert the property into residential property after 1 July 2016?

Example G:

Chang, a foreign natural person, entered into a contract on 15 June 2016 to buy a non-residential property in Melbourne for $1 million. As the property is non-residential property, the land transfer duty payable is $55,000.

Chang subsequently decides to convert the non-residential property into residential property on 30 September 2016. As Chang formed the intention to change the use of the property to residential property on 30 September 2016, he must notify the SRO in writing by 14 October 2016 and pay the additional duty by 30 October 2016 (i.e. within 30 days of forming the intention to change the use of the property).  

As the contract to buy the property was entered into prior to 1 July 2016, the rate of additional duty is 3%. Therefore Chang will also be subject to additional duty of $30,000 ($1 million x 3%). 

Landholder acquisitions

32. How does additional duty apply to landholder acquisitions?

Where a foreign purchaser makes a relevant acquisition in a landholder, as defined in the Duties Act 2000, that holds residential property, additional duty will only apply to that part of the landholder’s landholdings which comprise residential property.

33. Is there any additional duty on a disposal of shares in a landholder by a foreign purchaser?

No. The additional duty is only chargeable in respect of the acquisition of an interest (usually shares or units) in a landholder by a foreign purchaser.

34. How is the total amount of duty payable calculated where there is a relevant acquisition in a landholder that holds both residential and non-residential property?

Example H:

ABC Pty Ltd, an Australian-owned private company, is the owner of three parcels of land in Victoria, the total unencumbered value of which is $26 million. One of those parcels is residential property and has an unencumbered value of $1 million. The other two parcels are commercial properties and have a combined value of $25 million.

Jane is the sole director and shareholder of ABC Pty Ltd, however, her business partner, Jason, has acquired a 50% interest in the company. The agreement or arrangement to acquire the 50% interest was entered into on 1 July 2016. Jason is a foreign natural person. As a foreign purchaser, Jason’s acquisition of a 50% interest in ABC Pty Ltd would be subject to the general rate of land transfer duty as well as the additional duty on the residential property held by ABC Pty Ltd.

Total value of Victorian landholdings by ABC Pty Ltd $26,000,000
Interest acquired by Jason 50%
Dutiable value of interest acquired by Jason ($26m/2) $13,000,000
Rate of duty 5.5%
Duty payable on interest acquired ($13m x 5.5%) $715,000
Total value of Vic residential landholdings by ABC Pty Ltd $1,000,000
Interest acquired by Jason 50%
Additional duty rate 7%
Total amount of additional duty payable ($1m x 50% x 7%) $35,000
Total amount payable by Jason ($715,000 + $35,000) $750,000

Discretion

35. How do you apply for an exemption from additional duty?

The Treasurer, or the Commissioner under a delegation from the Treasurer, has discretion under the Duties Act 2000 to exempt a person from having a controlling interest in a corporation or substantial interest in a trust estate in certain circumstances.

The general principles and circumstances to be considered in deciding whether to grant an exemption are outlined in the Treasurer’s Guidelines. It is a legislative requirement that the Treasurer publish these guidelines in the Government Gazette.

If you wish to apply for an exemption, you should submit an application before completion of your transaction.

Charge on the land for unpaid duty

36. When does unpaid duty become a charge on the land?

Any unpaid duty is a first charge on the land where:

  • A transferee is liable to pay additional duty in respect of a transaction, 
  • A tax default has occurred (i.e. the correct amount of duty has not been paid by the due date), and
  • The Commissioner has made an assessment or reassessment of the transferee’s duty liability on or after 1 July 2016

37. Why does unpaid duty need to be a first charge on the land?

Unpaid duty involving a transferee that is liable to pay additional duty is a first charge on the land because it can be difficult to institute recovery proceedings against a person who resides overseas. The charge provides an effective means of securing any debt owed by a foreign purchaser.

38. Will the SRO seek to enforce the charge if the foreign owner transfers the property to another person?

The SRO may seek to enforce the charge against the new owner if the charge is registered on title. If the charge has not been registered and the property is sold, the SRO will not enforce the charge against the new owner.