In recent years, the New South Wales Government introduced surcharges to land tax and purchaser duty payable by "foreign persons". The rate of surcharge purchaser duty is presently 8 percent, while land tax is 2 percent.
Previously announced concessions for Australian-based developers who meet the definition of "foreign persons" came into effect on 5 March 2018.
Australian corporations can now apply for a refund of the surcharge purchaser duty or land tax if the land has been:
Importantly, sales cannot be to an associate of the Australian corporation.
Any application for a refund must be made within 12 months of the completion of the sale or issue of the subdivision certificate, and within 10 years of the completion of the original transfer of the residential land. Any purchases which settled before 21 June 2016 are subject to a five year time limit, so refund applications must be lodged before 21 June 2021.
Because the provisions are retrospective, any Australian-based developer who has paid the surcharge duty or land tax should investigate whether they are eligible for a refund.
The new provisions also allow an Australian corporation to apply for exemption from prospective obligations to pay surcharge purchaser duty and surcharge land tax. The exemption may cover a particular development or future acquisitions of land. Obtaining an exemption avoids the negative impact on project cash flow from outlaying funds at settlement, and waiting until completion of the project before seeking a refund. It is particularly useful for corporations which regularly undertake developments in New South Wales.
The Chief Commissioner will consider matters such as the following when deciding whether to grant an exemption—
An exemption can be conditional or it can be revoked where disqualifying conduct occurs.
If you would like to explore your eligibility to seek a refund or an exemption, please contact a member of our Real Estate team.