From 1 July 2015 there will be a 3 % surcharge above standard stamp duty rates for foreign purchases of residential property. This will result in a stamp duty rate of 8.5%.
A foreign purchaser includes a foreign natural person, a foreign corporation and a foreign trust. A foreign corporation or foreign trust is an entity that is controlled by a foreign purchaser either directly or indirectly. A controlling interest is usually an interest of more than 50% shareholding, voting power or potential voting power.
A residential purpose means the property can be used as a place of residence. If land is acquired that was not residential property and not intended to be residential property but subsequently the owner decides to develop the land for residential purposes then the surcharge will be payable at the time of the change in intention.
From 31 December 2015 there will also be a 0.5% land tax surcharge for absentee owners which applies to all landholdings, not just residential.
An absentee owner has a similar meaning as a foreign purchaser in relation to the stamp duty rules as outlined above.
The 0.5% results in an extra amount of land tax payable of $5,000 per $1 million of unimproved land value. By way of example, under current rules an absentee owner who holds land with an unimproved value of $3 million would pay $25,000 but next year under the proposed changes the same entity would pay approximately $40,000.
An exemption from the land tax surcharge applies to taxpayers who actively conduct business or activities on the land.
if you are a foreign purchaser who has recently purchased property or looking to purchase property or who owns property then you should seek advice about seeking a possible exemption from the surcharges. Exemptions are available depending on the degree of control or influence of a foreign or absentee person in an entity. Please contact Clare at Oakhill Lawyers if you would like further information.