Recent Legislative Changes That Can Affect Property Transactions

2016 NSW BUDGET

The New South Wales budget announcement on 21 June 2016 included a number of changes affecting foreign investors.

For foreign persons entering into a contract from 21 June 2016, there will be a 4% stamp duty surcharge on the purchase of residential real estate.

Foreign persons owning residential real estate will incur a 0.75% surcharge land tax surcharge for the 2017 land tax year.

The off-the plan concession deferring payment of stamp duty for 12 months has been abolished for foreign investors, meaning foreign persons purchasing off the plan from 21 June 2016 will be required to pay stamp duty three months from the contract date.

Victoria has imposed a similar stamp duty surcharge of 3% and 1.5% land tax surcharge from 1 July 2015 and 1.5%.  The stamp duty surcharge increased to 7% on 1 July 2016.  Queensland intends to impose a similar stamp duty surcharge of 3% from 1 October 2016.

CHANGES TO THE TAXATION ADMINISTRATION ACT 1956

From 4 July 2016, following changes to the Taxation Administration Act 1956, the NSW Office of State Revenue is required to collect contact and citizenship information about vendors and purchasers.

When stamping a purchase contract and transfer, a purchaser will be required to provide the following information:

• Land Tax Enquiry ID number (for vendor information to be attainable);
• Citizenship details;
• Residency details;
• Certified evidence of citizenship and residency;
• Foreign national details (if applicable).

FOREIGN RESIDENTS CGT WITHHOLDING PAYMENTS

From 1 July 2016, where a foreign resident sells real estate in Australia for a price of $2,000,000 or above, the purchaser will be required to withhold an amount equivalent to 10% of the price and pay that amount to the Australian Taxation Office unless the vendor serves the purchaser with a clearance certificate issued by the Australian Taxation Office.

The Vendor may attach a clearance certificate to the contract, or provide it to the purchaser prior to settlement.  If the Vendor fails to serve a clearance certificate on the purchaser prior to settlement, the purchaser must withhold an amount equivalent to 10% of the price.

The vendor may apply for a clearance certificate at any time they are considering selling real estate, and the certificate remains valid for 12 months.

The 2016 edition of the Law Society of NSW Contract for the Sale and Purchase of Land has been updated to address these changes.

For more information regarding on recent legislative changes affecting property transaction, please contact Deanna Jenkins, Head of Property Law on (02) 9249 7600 or email djenkins@bellpartnerslegal.com