Treasurer’s Guidelines Non-resident duty surcharge
The Victorian Government has introduced a duty surcharge of 3 per cent on the purchase or acquisition of residential property in Victoria by a non-resident purchaser from 1 July 2015.
Transitional arrangements are in place to ensure that the surcharge will not apply retrospectively. Therefore, non-resident purchasers who enter into a dutiable transaction (for example, enters into a contract of sale) or a relevant acquisition of an interest in a landholder that holds residential property (for example, enters an agreement or an arrangement for the relevant acquisition) before 1 July 2015, will not be subject to the surcharge.
A ‘foreign purchaser’ is defined as a foreign natural person, foreign corporation or a trustee of a foreign trust. In order for a corporation to be a foreign corporation, it must be either incorporated outside Australia, or have its controlling interest held by a foreign natural person, another foreign corporation or a trustee of a foreign trust. A trust is a foreign trust if the substantial interest in the capital of the trust estate is held by a foreign natural person, foreign corporation or the trustee of another foreign trust.
The Treasurer may exempt a person who has a controlling interest in a foreign corporation or a substantial interest in the capital of a trust estate of a foreign trust. A person who has an exemption is taken not to have the controlling interest or substantial interest. The effect of this is that the foreign corporation or foreign trust will be exempt from the non-resident duty surcharge.
The persons that are intended to be exempted from the non-resident duty surcharge from 1 July 2015 are those whose commercial activities add to the supply of housing stock in Victoria (either through new developments or through re-development, where such development is primarily residential). All other duties that are usually imposed will remain in place. The intention to exempt from the non-resident duty surcharge remains at the discretion of the Treasurer.
The Treasurer will have regard to any one or more of the following general principles and circumstances for the exemption to apply:
The nature and degree of interest or ownership and control
The degree of day to day control or input into the decisions of the corporation or trust a foreign person may have.
Whether the foreign person’s interest in the corporation or trust only grant to them limited rights.

The remoteness of the foreign person’s investment in the corporation or trust. For example, is it direct ownership or more remote through a series of other entities or investment platforms?
Practical influence to determine, directly or indirectly, the outcome of decisions of the entity
Whether the foreign person acquired its controlling interest or substantial interest as part of an investment strategy solely for the purposes of obtaining an income stream.
The level of involvement of the foreign person in the investment decisions of the corporation or trust.
The ability to influence the outcome of financial, operating and management decisions of the corporation or trust
Whether the directors of the corporation or trustee of the trust controlled or required to follow the directions of the foreign person.
The relationship between the persons responsible for the day-to-day operation of the corporation or trust and the foreign person.
Any other relevant circumstances

In assessing other circumstances which would be relevant, the Treasurer may consider the following: .
Impact on the economy

Whether the corporation with a foreign controlling interest or trust with a foreign substantial interest is actively investing in adding to the supply of housing stock in Victoria or purchasing existing property for redevelopment for the sale or use for primarily residential purposes.
Where land is acquired for development purposes, the extent and nature of that development.
The level of investment that is undertaken for development purposes and any relevant planning processes necessary to obtain approval for such development.
Competition

Whether the foreign corporation or foreign trust is able to compete fairly in the Victorian marketplace and whether there are wider consequences for Victoria.
Whether entities that are Australian-based but foreign controlled will be at a competitive disadvantage in providing an equivalent service or product in Victoria compared to locally domiciled entities.
For example, in purchasing residential property for the purpose of adding to new residential supply, the Treasurer may consider the competitive advantage/disadvantage that a wholly- owned Australian company may have compared to an Australian-based company with a controlling interest held by a foreign person/entity.

Impact on the community

The entity in question supplies residential stock to the Victorian market.
The level of Australian participation in the corporation that conducts its activities in Victoria with a foreign controlling interest or trust with a foreign substantial interest.
The level of use of Australian building contractors and other employees of the entity that conducts residential activities in Victoria.
Satisfaction of Foreign Investment Review Board requirements

Whether the Australian-based corporation with a foreign controlling interest or trust with a foreign substantial interest has notified the Foreign Investment Review Board (FIRB) for the purposes of purchasing residential property for development either as part of its “annual program” or otherwise.
The nature of the approval that has been provided by the FIRB for the purposes of purchasing residential property for development.
Whether the FIRB has imposed any conditions on the entity.

Character of the controlling interest or substantial interest

The extent to which the corporation or trust operates in a transparent manner and the extent to which it is subject to adequate and transparent regulation and supervision.
The corporate governance practices of the entity.

Independence of management

The location of the entity’s central management and the ability for the management to make decisions independent of the foreign person that holds the controlling interest in the corporation or substantial interest in the trust estate.