Stamp duty and land tax surcharges for foreign developers ... · PDF fileStamp Duty and Land...
Transcript of Stamp duty and land tax surcharges for foreign developers ... · PDF fileStamp Duty and Land...
Stamp Duty and Land Tax Surcharges for Foreign Developers and Investors
A guide to the operation of the new surcharges in Vic, NSW and Qld
Duty surcharges ‐ how they work
• Apply to agreements for transfer and transfers of land to foreign persons or entities
• Also apply to acquisitions of significant interests in landholding companies and unit trusts by foreign persons or entities
• Payable by transferee of land or acquirer of shares/units• Payable in addition to standard rate of duty• Applied to full dutiable value of property• Concessions do not apply • Normal exemptions apply
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Victoria New South Wales Queensland
Name Foreign Purchaser Additional Duty (FPAD)
Surcharge PurchaserDuty (SPD)
Additional Foreign Acquirer Duty (AFAD)
Start date 1 July 2015 21 June 2016 1 October 2016
Rate 7% 4% 3%
Property Residential property Residential land AFAD residential land
Transferee Foreign purchaser Foreign person Foreign person
Interest Direct or indirect Direct or indirect Direct or indirect
Change of intention? Yes No No
Treasurer’s exemption regime?
Yes No Yes
Duty surcharges ‐ an overview
Key concepts ‐ Foreign purchaser
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Category Victoria New SouthWales
Queensland
Individual Foreign natural person
Foreign person Foreign individual
Corporation Foreign corporation Foreign person Foreign corporation
Trust Foreign trust Foreign person Foreign trust
Key concepts – Foreign individuals
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Victoria
Foreign natural person
New South Wales
Foreign person
Queensland
Foreign individual
Natural person who is not:
• An Australian citizen;
• An Australian permanent resident; or
• A New Zealand citizen with a special category visa
Individual who is not ‘ordinarily resident’ in Australia as defined in the Foreign Acquisitions and Takeovers Act 1975
Australian citizens taken to be ordinarily resident in Australia
Non‐Australian citizens must satisfy 200 days test
Natural person who is not:
• An Australian citizen;
• An Australian permanent resident; or
• A New Zealand citizen with a special category visa
Key concepts – Foreign companies
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VictoriaForeign corporation
New South WalesForeign person
QueenslandForeign corporation
• A corporation incorporated outside Australia; or
• An Australian corporation in which one of the following persons has a ‘controlling interest’:
A foreign natural person
A foreign corporation
The trustee of a foreign trust
• A corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a ‘substantial interest’; or
• A corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an ‘aggregate substantial interest’
• A corporation incorporated outside Australia; or
• A corporation in which foreign persons or related persons of foreign persons have a ‘controlling interest’
Key concepts – Foreign trusts
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VictoriaForeign trust
New South WalesForeign person
QueenslandForeign trust
A trust in which one of the following persons has a ‘substantial interest’:
• A foreign corporation
• A foreign natural person
• Another person that holds the substantial interest as trustee of another foreign trust
• The trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a ‘substantial interest’; or
• The trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an ‘aggregate substantial interest’
A trust in which at least 50% of the trust interests are held by:
• A foreign individual;
• A foreign corporation;
• A foreign trustee; or
• A related person of any person referred to above
Key concepts – Controlling/substantial interest in a corporation
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VictoriaControlling interest
New South WalesSubstantial interestAggregate substantial interest
QueenslandControlling interest
A foreign person (alone or with associates):
• Has more than 50% of voting power or potential voting power;
• Has more than 50% of issued shares; or
• Is deemed by the Commissioner to have a controlling interest
• A foreign person (alone or with associates):
Has at least 20% of voting power or potential voting power; or
Has an interest of in at least 20% of the shares
• Two or more persons (by themselves or with associates) have at least 40% of voting power or potential voting power, or at least 40% of shares
One or more foreign persons or related persons of foreign persons:
• Has at least 50% of voting power or potential voting power;
• Has at least 50% of issued shares; or
Key concepts – Substantial interests in a trust
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VictoriaSubstantial interest
New South WalesSubstantial interestAggregate substantial interest
QueenslandInterest of at least 50%
A foreign person (alone or with associates):
• Has a beneficial interest of more than 50% of capital of trust estate;
• Is deemed by the Commissioner to have a controlling interest
Any potential beneficiary of discretionary trust is deemed to have beneficial interest in maximum percentage of capital of trust trustee can distribute to them
• A foreign person (alone or with associates):
Has a beneficial interest in at least 20% of income or property of trust; or
• Two or more persons (by themselves or with associates) have beneficial interests in at least 40%of income or property of trust
• Any potential beneficiary of discretionary trust is deemed to have beneficial interest in maximum percentage of income or property of trust trustee can distribute to them
• At least 50% of trust interests held by one or more foreign persons (or related persons)
• Trust interest = interest as beneficiary of trust
• Interest as beneficiary = beneficiary’s entitlement to trust property as a proportion of total trust property
• Each default beneficiary of discretionary trust is deemed to have trust interest equal to percentage of trust income or property they would receive in default of trustee appointment
Key concepts – Residential property/land
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VictoriaResidential property
New South WalesResidential land
QueenslandAFAD residential land
• Land capable of lawfully being used solely or primarily for residential purposes
• Land with a building intended for refurbishment or extension to lawfully be used solely or primarily for residential purposes
• Land intended for construction of building to be lawfully used solely or primarily for residential purposes
• Does not include land capable of lawfully being used solely or primarily for “commercial residential premises”, retirement village, residential care facility or supported residential service
• Land on which there is one or more dwellings or a building under construction which, when completed, will constitute one or more dwellings
• Vacant land that is zoned or otherwise designated for use for residential purposes or principally for residential purposes
• Strata lot if lawfully occupied or suitable for lawful occupation as separate dwelling
• Certain utility lots
• Certain land use entitlements
• Does not include commercial residential premises (but does include retirement villages and aged care facilities)
The land must be solely or primarily used for residential purposes, including:
• Land on which there is or will be constructed a building designed or approved by local government for human habitation by single family unit
• Land on which there is a building that will be refurbished, renovated or extended to become a building referred to above
• Land being developed or intended for development into a building as per above
Does not include hotels or motels
May include retirement villages, student accommodation and aged care facilities
Treasurer’s exemption (Victoria)
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• A foreign purchaser can apply for an exemption from the additional duty
• The Treasurer can determine that the person does not have a controlling interest in a corporation or a substantial interest in a trust estate
• The Treasurer has issued Guidelines setting out relevant factors the SRO will take into account
• The main factor is whether the foreign purchaser is Australian‐ based and their commercial activities add to the supply of housing stock in Victoria, either through new development or re‐development that is primarily residential
Applications for Treasurer’s exemption cont’d
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• Other factors the SRO will take into account in determining exemption applications ‐
The residence of the foreign purchaser
Nature and degree of foreign ownership
Independence of management ‐ practical influence to determine decisions of the entity
Impact on the economy and community
Impact on competitive position
Adhering to FIRB requirements
Case study 1 ‐ Off‐the‐plan apartment purchase
• Acquisition of apartment off‐the‐plan for $650,000• Victorian off‐the‐plan apartment concession not available in
respect of duty surcharge• Duty surcharge payable on full purchase price
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Duty payable Victoria New South Wales
Queensland
Australianpurchaser
$4,820 $24,740 $22,275
Foreign purchaser
$50,320 $50,740 $41,775
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Note: Duty calculation in Victoria based on an off‐the‐plan dutiable value of $162,500, being the best outcome under the ‘Fixed Percentage’ method
Case study 2 ‐ Foreign interests in corporations
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Shareholder 1Australian Trust
Shareholder 2Foreign Trust
Australian incorporated company ‐ Purchaser
Residential property
50%50%
Victoria New South Wales Queensland
No controlling interest held by foreign person
Not a foreign corporation
No surcharge payable
Foreign person has substantial interest
Foreign person (corporation)
Surcharge payable on full value
Foreign person has controlling interest
Foreign corporation
Surcharge payable on full value
Case study 3 ‐ Foreign interests in unit trusts
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Unitholder 2Foreign Trust
Unitholder 3Foreign Trust
Unit Trust
Residential property
30%40%
Victoria New South Wales Queensland
No substantial interest held by aforeign person
Not a foreign trust
No surcharge payable
Aggregate substantial interest held by foreign persons
Foreign person (trust)
Surcharge payable on full value
Interest of at least 50% held by one or more foreign persons
Foreign trust
Surcharge payable on full value
Unitholder 1Australian Trust
30%
Case study 4 ‐ Foreign interests in discretionary trusts
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Specified beneficiariesAustralian citizens
Potential beneficiaryItalian citizen
Residential property
Discretionary trust
Victoria New South Wales Queensland
Potential beneficiary has substantial interest
Foreign trust
Surcharge payable on full value
Potential beneficiary has substantial interest
Foreign person (trust)
Surcharge payable on full value
Beneficial interests limited to default beneficiaries
Not a foreign trust
No surcharge payable
Case study 5 ‐ Change of intention
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• October 2016 – foreign purchaser buys a golf course
• Operates golf course for 5 years
• February 2021 – owner decides to re‐develop golf course into townhouses
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Land Tax surcharges ‐ an overview
Land Tax surcharges ‐ how they work
• Payable where land is (wholly or partly) owned by foreign person or entity at relevant assessing date
• Payable by land owner or deemed land owner• Payable in addition to standard rate of land tax
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Case study 6 – Company Landholder
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Shareholder 1Australian citizen
Shareholder 2Foreign person
Australian incorporated company
Land
50%50%
Victoria New South Wales
If neither Shareholder has control, company is not an absentee owner
No surcharge payable
Land owner is foreign person because Shareholder 2 has substantial interest (at least 20%)
Surcharge payable on full value of land
Case study 7 – Unit Trust Landholder
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Unitholder 1Australian citizen
Unitholder 2Foreign person
Land
Unit Trust
50% 50%
Victoria New South Wales
Unit trust is an absentee owner because at least one beneficiary is an absentee beneficiary
Surcharge payable to extent of foreign ownership
Surcharge payable on 50% of value of land
If unit trust is a fixed trust, Unitholders are deemed to be owners for land tax purposes
Surcharge payable to extent of foreign ownership
Surcharge payable on 50% of value of land
Case study 8 – Discretionary Trust Landholder
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Specified beneficiariesAustralian citizens
Potential beneficiaryForeign person
Land
Discretionary Trust
Victoria New South Wales
Not Absentee Trust as specified beneficiaries are all Australian citizens
No surcharge payable
Foreign trust as potential beneficiary is foreign person
Surcharge payable on full value of land
Victoria New South Wales
Nominee relationship = fixed trust
Absentee trust because at least one beneficiary is an absentee beneficiary
Surcharge payable on 50% of value of land
Nominee relationship = fixed trust
Foreign trust because Joint Venturer 2 has at least 20% interest
Surcharge payable on 50% of value of land
Case study 9 ‐ Nominee Landholder
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Joint Venturer 1Australian trust
Joint Venturer 2Foreign trust
Australian incorporated
company (acting as nominee)
Land
50%JV Interest
50%JV Interest
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Victoria New South Wales
Queensland
Start date 1 July 2015 21 June 2016 1 October 2016
Rate 7% 4% 3%
Residential use Solely or primarily To the extent Solely or primarily
Commercial residentialpremises?
No Some? Some?
Change of intention? Yes No No
Change of residency status? No No Yes
Controlling interest More than 50% At least 20% At least 50%
Beneficiaries of discretionary trusts
Any potential beneficiary
Any potential beneficiary
Defaultbeneficiaries
Treasurer’s exemption regime?
Yes No Yes
Duty surcharges – Key differences between States
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Victoria New South Wales Queensland
Start date 2016 land tax year 2017 land tax year 2010
Rate 1.5% (from 1 July 16) 0.75% Same rate as for companies and trusts
Property All land Residential land All land
Exemptionsapply?
Yes Not PPR exemption Not PPR exemption or PPL exemption
Tax‐freethresholds
$250,000 (non‐trust)$25,000 (trust)
Nil (surcharge rate)$482,000 (general rate)
$350,000
Treasurer’s exemption regime?
Yes No No
Land Tax surcharges ‐ Key differences between States
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Questions & Answers
Craig WhatmanPartner, Transaction TaxesPitcher Partners Advisors Proprietary LimitedLevel 19, 15 William StreetMELBOURNE VIC 3000Phone: (03) 8610 5617Email: [email protected]
Contact
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William ZhangSenior Manager, Transaction TaxesPitcher Partners Advisors Proprietary LimitedLevel 19, 15 William StreetMELBOURNE VIC 3000Phone: (03) 8612 9252Email: [email protected] Zhang
Craig Whatman
Thank youFor your attention
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Thank you!