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 additional duty of 3 per cent on the dutiable value of your share of the property (prior to the application of any concessions). This is, generally, the price you pay for the property/land. This additional duty applies to contracts, transactions, agreements and arrangements entered into on or after 1 July 2015.

For example, you will not pay the additional duty if you entered into a contract to purchase residential property on 30 June 2015 that has a settlement date of 30 September 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.

The Victorian Government announced in its 2016-17 Budget that the rate of this additional duty will increase from 3 per cent to 7 per cent for contracts, transactions, agreements and arrangements entered into on or after 1 July 2016. 

Received a letter from us?

If you buy or acquire any land in Victoria, you must complete and lodge a Form 62 Purchaser Statement even if you believe you are not a foreign purchaser.

Please read our foreign purchaser frequently asked questions for more information. 

When does additional duty apply?

The additional duty applies to any arrangement or transaction that involves the transfer of interest in residential property. These include:

  • Buying a residential property at, for example, auction or by private sale,
  • Being given a residential property as a gift,
  • Certain leasing arrangements,
  • Transfers of interests in a deceased estate

The 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.

Where a foreign purchaser is exempt from paying land transfer or landholder duty, that purchaser will also be exempt from paying additional duty. Foreign purchasers are not entitled to a duty concession or a concessional rate of duty in respect of the additional duty payable.

Example A: Exemption applying in respect of additional duty

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.

Example B: Duty concession not applying when additional duty is payable

Kate, a foreign natural person, is transferred residential property bought off-the-plan for $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 concession 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 at the rate of 3 per cent on the dutiable value of the property of $500,000.

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 the nomination 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. 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.  

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.

Complete a purchaser statement

Calculating additional duty

The additional duty is calculated at the rate of 3 per cent the dutiable value of your share of the residential property. This is, generally, the price you pay for 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 at 3 per cent of 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 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

Residential property is:

  • Land that has a building on it that is designed and constructed solely or primarily for residential purposes and may be lawfully used as a place of residence,
  • Land that is vacant but will have residential premises built on it

Importantly, if you are a foreign purchaser who acquires property that is not residential property, but intend to make, or later decide to turn it into residential property, the additional duty may still apply. In this case, you must advise us of your intention in writing.

Dual-purpose property(s)

Sometimes, a property can be used for both residential and commercial purposes.

If a property is primarily used for residential purposes, then it is a residential property. If so, 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 

Corporations and trusts may, in some circumstances, be eligible for an exemption from the additional duty. The Treasurer has gazetted guidelines outlining the basis on which exemption decisions will be made. 

The exemption is intended to apply to those corporations or entities 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, please 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.

Failure to accurately identify as a foreign purchaser, or that residential property is being acquired, will attract penalties under the Taxation Administration Act 1997 (Vic) as well as the additional 3 per cent duty.