When you buy or acquire a property in Victoria, you must pay land transfer duty (otherwise known as stamp duty) unless an exemption applies.

If you are a foreign purchaser and you acquire residential property, you must pay foreign purchaser additional duty (FPAD) in addition to land transfer duty on the dutiable value of your share of the property. The dutiable value is the greater of the price you pay for, or the market value of, the property/land.

If the property acquired is exempt from duty, the additional duty does not apply. 

Example 1

In his last will and testament, Joe has bequeathed all his assets, including two properties in Victoria, to his sister Joan, who is a foreign natural person.

The transfer of the two properties to Joan pursuant to Joe’s will is exempt from land transfer duty. Joan will also be exempt from paying additional duty.

If the property acquired is eligible for a land transfer duty concession, the additional duty applies on the purchase price prior to the application of the concession. 

Example 2

Kate, a foreign natural person, is transferred residential property bought off the plan for a purchase price of $500,000 which she intends to occupy as her principal place of residence (PPR). Kate is eligible for the PPR and the off-the-plan concessions on the land transfer duty payable.

Additional duty is payable even though a concession may apply. Kate will be liable for the additional duty calculated on the purchase price of the property of $500,000.

If you buy or acquire any land in Victoria, you must complete and lodge a Form 62 Purchaser Statement. This form must be completed for all land acquisitions, even if:

  • The transaction is exempt from duty, or
  • The purchaser is not a foreign purchaser, or
  • The property is not residential property

Complete a purchaser statement

Please read our FAQs for more information. 

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When does additional duty apply?

Additional duty applies to any arrangement or transaction that involves the transfer of an interest in residential property to a foreign purchaser. These include:

  • Buying a residential property at, for example, auction or by private sale,
  • Buying a non-residential property with the intention to convert it to residential property,
  • Being given a residential property as a gift,
  • Certain leasing arrangements in respect of residential property,

The additional duty applies even if you only acquire part of, or a part interest, in the property. It also applies to relevant acquisitions in a landholder that holds residential property.

This additional duty applies to contracts, transactions, agreements and arrangements entered into on or after 1 July 2015. You will not pay the additional duty if you entered into a contract to purchase residential property on or before 30 June 2015 even if the settlement date is on or after 1 July 2015. 

Where you have entered into a contract to purchase residential property before 1 July 2015 but nominate a foreign purchaser to take a transfer right of the property on or after 1 July 2015, additional duty may apply to the transfer.

Rates of additional duty

For contracts, transactions, agreements and arrangements entered into on or after 1 July 2015 but before 1 July 2016, the additional duty rate is 3% (even if the settlement date is on or after 1 July 2016). For contracts, transactions, agreements and arrangements entered into on or after 1 July 2016, the additional duty rate is 7%.

Nominations and sub-sale events

Additional duty will apply where a foreign purchaser is nominated to take a transfer of residential property and that nomination is executed on or after 1 July 2015 and triggers a sub-sale event. This is the case even if the sale contract was entered into before 1 July 2015.  

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 so 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.  

Where a nomination does not trigger a sub-sale event (i.e. no additional consideration and no land development) the transaction will be considered to have been entered into on the date of the contract and not the date of the nomination. In this case, additional duty will not apply in respect of a nomination made in respect of a contract entered into before 1 July 2015.

Summary of transitional provisions for sub-sale transactions

Date contract entered into Nomination (sub-sale event) Transfer FPAD
Before 1 July 2015 Before 1 July 2015 After 1 July 2015 Nil
Before 1 July 2015 After 1 July 2015 but before 1 July 2016 After 1 July 2015 3%
After 1 July 2015 but before 1 July 2016 After 1 July 2015 but before 1 July 2016 After 1 July 2015 3%
Before 1 July 2015 After 1 July 2016 After 1 July 2016 7%

Calculating additional duty

The additional duty is calculated at the applicable rate on the dutiable value of your share of the residential property which is the greater of the price you pay for, or the market value of, the property/land. 

You can calculate the additional duty using these three steps:

  1. Calculate the land transfer duty in the usual way, applying any relevant concessions
  2. Calculate the additional duty on the dutiable value of the property (prior to the application of any concession)
  3. Add the land transfer duty amount in step 1 to the additional duty amount in step 2 to determine the total duty amount payable for the transfer.

When you make a relevant acquisition in a landholder, duty is charged on the unencumbered value of the total landholdings of the landholder. If you make a relevant acquisition as a foreign purchaser, the additional duty surcharge will only apply to the interest you acquired in the landholder proportional to the landholder’s landholdings which comprise residential property.

Residential property

The definition of residential property was amended by the State Taxation and Other Acts Amendment Act 2016 with effect from 1 July 2016.

Residential property is:

  •  Land capable of being used solely or primarily for residential purposes and that may be lawfully used in that way,
  •  Land which includes a building, or part of a building, that a person intends to refurbish or extend so the land is capable of being used solely or primarily for residential purposes and that may be  lawfully used in that way,
  •  Land:
    • on which a person intends to construct a building so the land is capable of being used solely or primarily for residential purposes and may be lawfully used in that way, or
    • in respect of which a person has undertaken or intends to undertake land development for the purposes of:
      • constructing a building so the land is capable of being used solely or primarily for residential purposes and may be lawfully used in that way, or
      • enabling another person to construct a building so the land is capable of being used solely or primarily for residential purposes and may be lawfully used in that way

Refurbish means to undertake building work that requires a building permit to be issued under the Building Act 1993 for the conversion of an existing building.

Land development means any one or more of the following:

  • Preparing a plan of subdivision or taking steps to have the plan registered under the Subdivision Act 1998,
  • Applying for or obtaining a permit under the Planning and Environment Act 1987 in relation to the use or development of the land,
  • Requesting a planning authority to prepare an amendment to a planning scheme that would affect the land,
  • Applying for or obtaining a permit or approval under the Building Act 1993,
  • Doing anything in relation to the land for which a permit or approval  under the Building Act 1993 would be required,
  • Developing or changing the land in any other way that would lead to the enhancement of its value

The definition of residential property ensures that the following are residential properties:

  • Land containing a non-residential building that is purchased with the intent of converting it into residential premises, e.g. a foreign person purchases a disused warehouse with the intention of refurbishing the warehouse into residential apartments,
  • A residential premises that forms part of a non-residential building, (e.g. a foreign person purchases a penthouse that forms part an office building),
  • Vacant land purchased for residential development where the land is on sold to third parties to construct the residences (e.g. a foreign person purchases vacant land on which they undertake land development, such as preparing a plan of subdivision for a housing development) which they on sell to a builder

Where a foreign purchaser entered into a contract before 1 July 2016 (the date the amended definition of residential property was introduced) to buy property described in the three scenarios above, the property is not residential property and the additional duty does not apply. 

Residential property does not include land capable of being used solely or primarily as commercial residential premises, a residential care facility, a supported residential service or a retirement village and that may lawfully be used in that way.

Commercial residential premises

Commercial residential premises has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act) and includes:

  • Hotel, motel, inn, hostel or boarding house,
  • Premises used to provide accommodation in connection with a school,
  • Caravan park or a camping ground, or
  • Anything similar to residential premises described above

Hotel, motel, inn, hostel or boarding house

These premises are not defined in the GST Act. They take their ordinary meaning and it is necessary to consider the characteristics of the premises.

A hotel, motel, inn, hostel or boarding house generally exhibits the following characteristics:

  • The premises are operated on a commercial basis or businesslike manner,
  • The premises have the capacity to provide accommodation to multiple, unrelated guests or residents at the same time,
  • The premises offer accommodation to the public,
  • Providing accommodation is the main purpose of the premises,
  • The premises have central management to accept reservations, allocate rooms, receive payments and perform a range of services,
  • The entity operating the premises supplies accommodation in its own right rather than as agent,
  • Management provides guests and residents with services and facilities, or arranges for third parties to provide them,
  • The occupants have the status as guests – they are predominantly travelers who have their PPR elsewhere. The occupants do not enjoy an exclusive right to occupy any particular part of the premises in the same way as a tenant 

If a property is considered a commercial residential property for GST purposes, the property is not subject to the additional duty. For further information about GST and commercial residential premises, please refer to the ATO website.

Separately titled rooms and apartments

Separately titled rooms or apartments are capable of being used solely or primarily for residential purposes.  As a separately titled room or apartment by itself cannot exhibit the characteristics of commercial residential premises, purchasing a separately titled room or apartment in a hotel or serviced apartment is residential property for the purposes of additional duty.

Residential care facilities, supported residential services and retirement villages

Residential care facility has the same meaning as in section 76 of the Land Tax Act 2005.

Supported residential service has the same meaning as in the Supported Residential Services (Private Proprietors) Act 2010.

Retirement village has the same meaning as in the Retirement Villages Act 1986.

Change of intention

A foreign purchaser who acquires property that is not residential property but subsequently forms the intention to convert it into residential property may have to pay the additional duty. You must advise us in writing of your intention to convert the property into residential property within 14 days of forming that intention.

If the contract or transaction to acquire the property that is not residential property was entered into:

  • Before 1 July 2015 and you subsequently formed the intention to convert it into residential property, it is not subject to the additional duty,
  • On or after 1 July 2015 but before 30 June 2016 and you subsequently formed the intention to convert it into residential property, the applicable rate of additional duty is 3%,
  • On or after 1 July 2016 and you subsequently formed the intention to convert it into residential property, the applicable rate of additional duty is 7%

Dual-purpose property(s)

A property can be used for both residential and commercial purposes. If it is primarily used for residential purposes, then it is a residential property and the additional duty is applied to the foreign purchaser’s share of the dutiable value of the whole property, including the part that is not used for residential purposes.

Foreign purchasers

You will be a foreign purchaser if you are a foreign natural person, a foreign corporation or a trustee of a foreign trust.

Foreign natural persons

You are a foreign purchaser if you are not:

  • A citizen or permanent resident of Australia,
  • Or a New Zealand citizen with a Special Category Visa (Subclass 444)

Foreign corporations

A foreign corporation includes:

  • Corporations incorporated outside Australia, and
  • Corporations incorporated in Australia if a foreign natural person, another foreign corporation or trustee of a foreign trust has a controlling interest in those corporations 

Foreign trusts

A foreign trust is a trust where a foreign natural person, foreign corporation or in the trustee of another foreign trust, has a substantial interest in the trust estate of that trust.

Controlling interest in a corporation

A foreign natural person, foreign corporation or the trustee of a foreign trust has a controlling interest in a corporation (either alone or with an associated person) when that person or entity:

  • Is in a position to control more than 50 per cent of the votes (voting power or potential voting power),
  • Has more than 50 per cent of the issued shares in that corporation, or
  • Has (in the Commissioner's opinion) the ability to influence the outcome of the decisions about the corporation’s financial and operating policies, taking into account certain factors (the practical influence a person can exert in addition to any rights the person can enforce, any practice or behaviour affecting the corporation’s financial or operating policies, even if that practice or pattern of behaviour involves the breach of an agreement or breach of trust)

An "associated person" can be any of the following:

  • A relative of the foreign purchaser,
  • A partner in a partnership,
  • Another corporation with the same majority shareholder as the foreign corporation, or
  • A trustee of the trust in which the foreign purchaser is a beneficiary

Note: the associated person does not have to be a foreign natural person, foreign corporation or the trustee of a foreign trust.

Voting power and potential voting power

The voting power in a corporation refers to the maximum number of votes that might be cast at a general meeting of the corporation.

Potential voting power in a corporation refers to the voting power based on the assumption that the votes might be cast at a general meeting of the corporation including each vote that:

  1. Might exist in the future because of the exercise of a right (whether actual, prospective or contingent), and
  2. If it came into existence, might be cast at a general meeting of the corporation

Example 1: The transferee corporation is a foreign purchaser

XYZ Pty Ltd purchases land in Victoria. XYZ Pty Ltd is a corporation incorporated in Australia. Its shareholders are A Pty Ltd as to 45 per cent and B Pty Ltd as to 55 per cent.

B Pty Ltd has two shareholders, both of whom are foreign natural persons. As a result, B Pty Ltd is a foreign corporation who has a controlling interest in XYZ Pty Ltd which makes XYZ Pty Ltd a foreign corporation.

Example 2: The transferee is a foreign purchaser because there is a foreign natural person corporation or trust in the transferee’s corporate structure

XYZ Pty Ltd purchases residential property in Victoria. XYZ Pty Ltd is a corporation incorporated in Australia. XYZ Pty Ltd has two shareholders, A Pty Ltd as to 45 per cent and B Pty Ltd as to 55 per cent. B Pty Ltd has two shareholders, Danny and Elizabeth. Danny holds an Australian permanent visa and has 35 per cent of the shares in B Pty Ltd. Elizabeth is a foreign natural person who has 65 per cent of the shares in B Pty Ltd.

Diagram to illustrate example 2

Elizabeth has an interest in more than 50 per cent of the issued shares in B Pty Ltd and so has a controlling interest in B Pty Ltd. B Pty Ltd holds more than 50 per cent of the issued shares, and therefore a controlling interest, in XYZ Pty Ltd. This makes XYZ Pty Ltd a foreign corporation which means that XYZ Pty  Ltd will be liable for the additional duty payable by foreign purchasers of residential property.

Substantial interests in a trust

A foreign natural person, foreign corporation or foreign trust has a substantial interest in a trust (either alone, or with an associated person) when that person or entity:

  • Has a beneficial interest of more than 50 per cent of the capital of the estate of the foreign trust, or
  • Has (in the Commissioner's opinion) the capacity to determine or influence the outcome of the decisions about the administration and conduct of the trust, taking into account certain factors (such as the practical influence the person can exert in addition to any rights the person can enforce, and any practice or behaviour affecting the trustee’s administration and conduct of the trust, even if that practice or pattern of behaviour involves the breach of an agreement or breach of trust)

For discretionary trusts, a person or member of a class of persons, is taken to have a beneficial interest in the maximum percentage of the capital of the foreign trust estate that the trustee of the discretionary trust is empowered to distribute to that person.

Example 3: The transferee trust is a foreign purchaser

ABC Pty Ltd acts as trustee for the ABC Unit Trust which has two unitholders, Joe and Elena. Joe is an Australian citizen who holds 40 per cent of the units in the unit trust. Elena is a foreign natural person who holds 60 per cent of the units in the unit trust.

Diagram to illustrate example 3

Elena has a substantial interest in the ABC Unit Trust, which makes it a foreign trust.

Example 4: The transferee is a foreign purchaser because there is a foreign natural person, corporation or trust in the transferee’s trust structure

ABC Pty Ltd as trustee of the ABC Unit Trust buys residential property on its behalf. The ABC Unit Trust has two unitholders, Steve and Z Pty Ltd. Steve holds an Australian permanent visa and 40 per cent of the units in the unit trust, whilst Z Pty Ltd is a corporation incorporated in Australia which holds 60 per cent of the units in the unit trust.

The sole shareholder of Z Pty Ltd is Poli, a foreign natural person. Poli has an interest in more than 50 per cent of the issued shares in Z Pty Ltd and so has a controlling interest in Z Pty Ltd. Z Pty Ltd holds an interest in more than 50 per cent of the capital of the trust estate of the ABC Unit Trust and therefore has a substantial interest in the unit trust. This makes the ABC Unit Trust a foreign trust which means ABC Pty Ltd on behalf of the ABC Unit Trust will be liable for the additional duty payable by foreign purchasers of residential property.

Diagram to illustrate example 4

Application for exemption 

Foreign corporations and foreign trusts may, in some circumstances, be eligible for an exemption from the additional duty. The Treasurer has gazetted guidelines outlining the general principles and circumstances which will be considered in deciding whether an exemption should be granted. 

The exemption is intended to apply to those corporations or trusts whose activities in the development or re-development of property adds to the supply of housing stock in Victoria. The effect of an exemption is that the foreign corporation or foreign trust in which the person has a controlling or substantial interest, will not have to pay the additional duty.

The Treasurer has a delegable power to determine applications for this exemption and has delegated the power to make this exemption decision to the Commissioner.  While this delegation is in force, the Treasurer no longer has the power to make exemption decisions. All applications for exemptions must be directed to the SRO.

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

Notification requirements

If you are a purchaser or transferee of property in Victoria and you enter into a contract, transaction, agreement or arrangement on or after 1 July 2015, you must complete and lodge a purchaser statement with your other land transfer documents.

If a transferee fails to accurately identify in the purchaser statement that they are a foreign purchaser or that residential property is being acquired, the Commissioner will reassess the duty payable to include the additional duty on the transaction. The reassessment may also attract penalties and interest under the Taxation Administration Act 1997.

Charge on residential property

If a foreign purchaser is liable to pay additional duty but fails to do so by the due date and the Commissioner has issued an assessment of the additional duty liability on or after 1 July 2016, the unpaid duty is a first charge on the residential property. If the charge has not been registered and the property is sold, however, the SRO will not enforce the charge against the new owner.