When you buy or acquire property in Victoria, you may have to pay land transfer duty (also known as stamp duty).
If you are a foreign purchaser and you acquire residential property, as well as land transfer duty, you may have to pay foreign purchaser additional duty (additional duty) on the share of the property you acquired.
If the property you acquired is exempt from land transfer duty, the additional duty does not apply. If the property you acquired is eligible for a land transfer duty concession, the additional duty is calculated on the dutiable value of the property before the concession is applied.
Example 1 - Exempt transfer
In his last will and testament, Joe bequeathed all his assets, including two properties in Victoria, to his sister Joan, a foreign natural person.
The transfer of the two properties to Joan, pursuant to Joe’s will, is exempt from land transfer duty so Joan is also exempt from paying additional duty.
If the property acquired is eligible for a land transfer duty concession, additional duty applies on the purchase price before the concession is applied.
Example 2 - Foreign purchaser additional duty applies
Kate, a foreign natural person, buys residential property off-the-plan for $500,000. She intends to live there as her principal place of residence (PPR). Kate is eligible for both the PPR concession and the off-the-plan concession.
Additional duty is payable even though land transfer duty concessions apply. Kate is liable for the additional duty calculated on the $500,000 purchase price.
Read our Frequently Asked Questions for more information.
You are 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,
- A New Zealand citizen with a Special Category Visa (Subclass 444).
A foreign corporation includes:
- Corporations incorporated outside Australia,
- Corporations incorporated in Australia if a foreign natural person, another foreign corporation, or a trustee of a foreign trust has a controlling interest in those corporations.
A foreign trust is a trust where a foreign natural person, foreign corporation or trustee of another foreign trust, has a substantial interest in the trust estate of that trust.
When does additional duty apply?
Additional duty applies to any arrangement or transaction involving the transfer of an interest in residential property to a foreign purchaser, including:
- Buying a residential property at, for example, auction or by private sale,
- Buying a non-residential property with the intention of converting it to residential property,
- Being given a residential property as a gift,
- Certain leasing arrangements in respect of residential property.
Additional duty applies to the acquisition of residential property (or a relevant acquisition in a landholder that holds residential property) on or after 1 July 2015. However, you will not pay additional duty if the acquisition is the result of a contract you entered into on or before 30 June 2015. It 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 contract to purchase residential property is entered into before 1 July 2015 and you are nominated to take the transfer of the property on or after 1 July 2015, additional duty may apply to the transfer.
Exemption if you buy with your spouse or partner
If you are a foreign purchaser, you may be entitled to an exemption from additional duty if you purchase a principal place of residence jointly with your spouse/domestic partner who is an Australian citizen, permanent resident or New Zealand citizen who holds a special category visa. You must, however, live in the property as your principal place of residence for a continuous period of 12 months, starting within 12 months of becoming entitled to possession of the property. You can ask us to vary this requirement to:
- reduce the 12 month residence period,
- determine that a temporary absence from the residence does not break the continuity of residence, or
- extend the period in which the residence must begin.
This exemption is available for transfers from 14 June 2018.
Rates of additional duty
For contracts, transactions, agreements and arrangements entered into:
- on or after 1 July 2015 but before 1 July 2016 (even if the settlement date is on or after 1 July 2016), the additional duty rate is 3 per cent,
- on or after 1 July 2016, the additional duty rate is 7 per cent
Additional duty will apply where a foreign purchaser is nominated to take a transfer of residential property, the nomination is executed on or after 1 July 2015 and it 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 applies.
Where a nomination does not trigger a sub-sale event (i.e. no additional consideration and no land development), the transaction is 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.
|Date contract entered into||Nomination
|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
|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 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, prior to any land transfer duty concessions being applied.
You can calculate your total duty, including additional duty, by:
- Calculating the land transfer duty in the usual way, applying any relevant concessions,
- Calculating the additional duty on the dutiable value of the property (ignoring any concessions that reduce dutiable value),
- Adding 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 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,
- 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
Residential property does not include commercial residential premises, a residential care facility, a supported residential service or a retirement village and which may lawfully be used in that way.
Refurbish means building work that requires a building permit to be issued under the Building Act 1993 for converting 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 these 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 build 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
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 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 exhibit the following characteristics:
- The premises are operated on a commercial basis or in a 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,
- The premises' main purpose is providing accommodation,
- The premises are centrally managed 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 an agent,
- Management provides guests and residents with services and facilities, or arranges for third parties to provide them,
- Occupants have the status of guests, predominantly travellers with their PPR elsewhere, who do not have 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 premises for GST purposes, the property is not subject to the additional duty. For more information about GST and commercial residential premises, refer to the Australian Taxation Office 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 may be 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 s76 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
If you are a foreign purchaser who acquires property that is not residential property but form the intention to convert the property into residential property, you may have to pay the additional duty. Within 14 days of forming the intention to convert the property, you must advise us in writing of that intention.
The amount of additional duty you need to pay if there has been a change of intention to convert non-residential property into residential property, depends on when the contract or transaction to acquire the property was entered into:
- Before 1 July 2015, it is not subject to the additional duty,
- On or after 1 July 2015 but before 1 July 2016, the applicable rate of additional duty is 3 per cent,
- On or after 1 July 2016, the applicable rate of additional duty is 7 per cent.
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.
A foreign natural person, foreign corporation or the trustee of a foreign trust has a controlling interest in a corporation when that person or entity either alone, or together with an associated person, or another foreign natural person, foreign corporation or the trustee of a foreign trust:
- 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,
- 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:
- Might exist in the future because of the exercise of a right (whether actual, prospective or contingent), and
- 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, with 45 per cent, and B Pty Ltd, with 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 with 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, with 45 per cent, and B Pty Ltd, with 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.
Elizabeth has an interest in more than 50 per cent of the issued shares in B Pty Ltd and therefore has a controlling interest in B Pty Ltd. This means B Pty Ltd is a foreign corporation. B Pty Ltd holds more than 50 per cent of the issued shares, and therefore has a controlling interest, in XYZ Pty Ltd. This makes XYZ Pty Ltd a foreign corporation also, meaning XYZ Pty Ltd is liable for additional duty on purchases of residential property.
A foreign natural person, foreign corporation or the trustee of a foreign trust has a substantial interest in a trust when that person or entity either alone, or together with an associated person, or another foreign natural person, foreign corporation or the trustee of a foreign trust:
- 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 trust estate that the trustee of the discretionary trust is empowered to distribute to that person. The effect of this is that a discretionary trust that has any potential foreign beneficiaries will generally be a foreign trust for the purposes of the additional duty provisions, subject to the information provided on family trusts.
Family trusts are predominantly discretionary in nature. These trusts will often have a wide class of family members as general beneficiaries, which may include foreign persons who are not intended to benefit from the trust. As such, in interpreting trust deeds of this nature, the Commissioner will adopt a practical approach so that trusts that have foreign beneficiaries who have not and who are, based on available information, unlikely in the future to receive any distributions, will not be considered a foreign trust.
In adopting a practical approach, the Commissioner will consider the following factors:
- Any intention (manifest or implied) of the settlor and/or trustee to vest any capital or income in the foreign person(s),
- The relationship or connection between the foreign persons and the person(s) for whom the trust was established,
- The likelihood of the foreign person(s) receiving or benefiting from any of the capital or income of the trust, having regard to any historical distributions of income and/or capital, and
- Any other relevant information available to the Commissioner.
Foreign trust examples
Example 3: The transferee trust is a foreign purchaser
ABC Pty Ltd acts as trustee for the ABC Unit Trust which has two unit holders, 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.
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. The ABC Unit Trust has two unit holders, Steve and Z Pty Ltd. Steve holds an Australian permanent visa and 40 per cent of the units in the unit trust, while 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. As Poli has an interest in more than 50 per cent of the issued shares in Z Pty Ltd, she has a controlling interest in Z Pty Ltd, making Z Pty Ltd a foreign corporation. Z Pty Ltd holds an interest in more than 50 per cent of the capital of the trust estate of the ABC Unit Trust, Z Pty Ltd 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, liable for the additional duty on purchases of residential property.
Foreign corporations and foreign trusts may, in some circumstances, be eligible for an exemption from 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 corporations or trusts that are Australian based and whose activities in developing or re-developing 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 delegated the power to determine applications for this exemption to the Commissioner. While this delegation is in force, the Treasurer does not have the power to make exemption decisions. All applications for exemptions must be directed to the SRO.
There are two sets of guidelines. The guidelines issued on 11 August 2015 will apply to any transaction or relevant acquisitions that occur before 5 January 2018.
Following a scheduled review, updated guidelines were issued on 5 January 2018, which apply to any transactions or relevant acquisitions occurring on or after 5 January 2018.
If you want to apply for an exemption, you should submit an application before completing your transaction.
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 provide information that shows you are foreign purchaser when you lodge your digital duties form.
Any underpayment in duty that arises because you fail to accurately identify in a digital duties form that you are a foreign purchaser or that residential property is being acquired attracts penalties and interest under the Taxation Administration Act 1997. It is also an offence to give to us false or misleading information that affects a tax liability, or to deliberately omit information that affects a tax liability.
Charge on residential property
Unpaid duty is a first charge on the residential property if a foreign purchaser fails to pay additional duty by the due date, and the Commissioner has issued an assessment for the additional duty liability on or after 1 July 2016. However, if the charge has not been registered and the property is sold, we will not enforce the charge against the new owner.