27 Jan Government Tightens Foreign Investor Rules
Both the Federal and State governments have made several changes over the last few months that affect foreign based property investors.
- Land Tax payable by foreign and non-resident land owners has generally been increased and is different in each state as is the definition of who is captured by the additional charges. In Queensland for example, the additional liability is calculated on residency whereas in New South Wales being an Australian citizen exempts you from the surcharge. There is no additional Land Tax liability for non-residents in South Australia, Western Australia, or the ACT. We have compiled a summary of the additional charges as they apply to property in each state summarised the key changes below.
- The Foreign Investment Review Board has also reformed some of the rules relating to foreign investment. We have not included those reforms in this update. For more information contact me on (07) 5448 9600 or refer to the Foreign Investment Review Board.
- There have been some changes to Stamp Duty in Victoria and Queensland that have increased the charges payable by foreign investors. We have not included those reforms in this update but will provide further details shortly. If you have any questions about these changes, contact me on (07) 5448 9600 or have a chat with your property lawyer.
This summary is not advice and you should always give us a call to check prior to committing to any property purchase or restructure. All information is current as at the date of this post.
Land Tax
Land Tax is a tax levied on property owners. It is administered by each state except for the Northern Territory where there is no Land Tax. The rules and calculations that apply vary depending on where the property and property owner is located.
Generally, there are exemptions for Principal Places of Residence (PPR) and thresholds that apply to different ownership structures. These exemptions are not universally adopted and the definition of a PPR may differ to the tax office definition. Please give me a call if you are unsure of your potential liability.
Summary of Liability by State or Territory
Queensland (Click here for more information)
- Land Tax is levied annually on the property owner as at midnight on the 30th June each year.
- Absentee owners are not entitled to the same threshold as resident individuals. For more information see our Land Tax – Foreign and Absentee Owners Factsheet.
Rate of Land Tax in Queensland
The land tax rates in Queensland depend on your structure and residency status. An exemption is usually available for a home where it is used wholly or partly as your principal place of residence and that land is owned in an individual name. Some trustees may also be entitled to the home exemption. CLICK HERE to check whether you are eligible for the home exemption.
There are also special rules that apply to Primary Production land holdings.
| Individuals who usually live in Australia | No land tax up to $599,999.
$500 fixed fee plus 1.0% of the land value between $600,000 and $999,999. $4,500 plus 1.65% of the value above $1,000,000 and $2,999,999. $37,500 plus 1.25% of the value above $3,000,000 and $4,999,999. $62,500 plus 1.75% of the value above $5,000,000. |
| Individuals who usually live outside Australia
This includes Australian citizens working overseas and those not usually living in Australia. |
No land tax up to $349,999.
$1,450 fixed fee plus 1.7% of the land value between $350,000 and $2,249,999. $33,750 plus 1.5% of the value above $2,250,000 and $4,999,999. $75,000 plus 2.0% of the value above $5,000,000. |
| Companies and Trusts | No land tax up to $349,999.
$1,450 fixed fee plus 1.7% of the land value between $350,000 and $2,249,999. $33,750 plus 1.5% of the value above $2,250,000 and $4,999,999. $75,000 plus 2.0% of the value above $5,000,000. In Queensland land in a trust is held in the legal name of the trustee(s). Therefore, it is important if you are an individual trustee of a trust that you advise the Office of State Revenue of the separate holdings to ensure the appropriate rates thresholds are applied to each land holding. |
New South Wales (Click here for more information)
- Land Tax is levied annually on the property owner as at midnight on the 31st December each year.
- A surcharge of 0.75% applies to foreign land owners. For more information see our Land Tax – Foreign and Absentee Owners Factsheet.
Rate of Land Tax in New South Wales
Land Tax in NSW is levied at the same rate for all land owners but the threshold does not necessarily apply to all owners. There are 5 trust types in NSW that receive the threshold with a 6th trust, a Special Trust, that does not receive the benefit of the threshold. Most discretionary and hybrid trusts will be Special Trusts.
| Individuals | $100 fixed fee plus 1.6% of the land value between $549,000 and $3,357,000.
$45,028 plus 2% of the value above $3,357,000. |
| Companies | A company is assessed in the same way as a sole owner unless it is related to another company.
When assessing related companies only one threshold applies. |
| Fixed Trust | Includes some Unit Trusts and all Bare Trusts where beneficiary entitlements cannot be varied by the trustee in any way.
The threshold will apply. |
| Superannuation Trust | A complying superannuation fund, a complying approved deposit fund, or a pooled superannuation trust.
The threshold will apply. |
| A Trust created by a will | The threshold will apply but if it is a discretionary testamentary trust it will generally lose the benefit of the threshold 24 months after the date of death of the testator. |
| A Family Unit Trust | This is a bit of an odd one and refers to a unit trust that holds land with a taxable value less than $1,000,000 where 95% or more of the units are owned by family.
I don’t see any difference between this and a fixed unit trust and both receive the benefit of the threshold. There are some other conditions to qualify as a family unit trust so contact me if you think this could apply to you. |
| A Concessional Trust | A trust where the land is held for the benefit of a person under 18, subject to a guardianship order, or in the target group under the Disability Services Act 1993.
The threshold will apply. |
| A Special Trust | A trust that does not meet any of the above criteria. This will generally cover all discretionary and hybrid trusts.
These trusts do not receive the benefit of the threshold and are assessed from $1 land value. |
Victoria (Click here for more information)
- Land Tax is levied annually on the property owner as at midnight on the 31st December each year.
- Absentee owners are charged an Absentee Owner Surcharge of 1.5% from 1 January 2017 (previously 0.5%). For more information see our Land Tax – Foreign and Absentee Owners Factsheet.
Rate of Land Tax in Victoria
The land tax rates in Victoria depend on your structure and absentee status.
There are four tiers of charges:
- The General Rates; and
- The Trust Surcharge Rates; and
- The Absentee Surcharge General Rates; and
- The Absentee Surcharge Trust Surcharge Rates.
In some circumstances land owned by a trust can be assessed directly to a nominated person at the general rates. An exemption is usually available for a home where it is used wholly or partly as your principal place of residence and that land is owned in an individual name. Some trustees may also be entitled to the home exemption.
| General Land Tax Rates | No land tax up to $250,000.
$275 fixed fee plus 0.2% of the land value between $250,000 and $600,000. $975 plus 0.5% of the value between $600,000 and $1,000,000. $2,975 plus 0.8% of the value between $1,000,000 and $1,800,000. $9,375 plus 1.3% of the value between $1,800,000 and $3,000,000. $24,975 plus 2.25% of the value above $3,000,000. |
| Trust Surcharge Land Tax Rates | No land tax up to $25,000.
$82 fixed fee plus 0.375% of the land value between $25,000 and $250,000. $926 plus 0.575% of the value between $250,000 and $600,000. $2,938 plus 0.875% of the value between $600,000 and $1,000,000. $6,438 plus 1.175% of the value between $1,000,000 and $1,800,000. $15,838 plus 0.7614% of the value between $1,800,000 and $3,000,000. $24,975 plus 2.25% of the value above $3,000,000. |
| Absentee Surcharge General Rates | No land tax up to $250,000.
$4,025 fixed fee plus 1.7% of the land value between $250,000 and $600,000. $9,975 plus 2.0% of the value between $600,000 and $1,000,000. $17,975 plus 2.3% of the value between $1,000,000 and $1,800,000. $36,375 plus 2.8% of the value between $1,800,000 and $3,000,000. $69,975 plus 3.75% of the value above $3,000,000. |
| Absentee Surcharge Trust Rates | No land tax up to $25,000.
$457 fixed fee plus 1.875% of the land value between $25,000 and $250,000. $4,676 plus 2.075% of the value between $250,000 and $600,000. $11,938 plus 2.375% of the value between $600,000 and $1,000,000. $21,438 plus 2.675% of the value between $1,000,000 and $1,800,000. $42,838 plus 2.2614% of the value between $1,800,000 and $3,000,000. $69,975 plus 3.75% of the value above $3,000,000. |
Western Australia (CLICK HERE for more information)
- Land Tax is levied annually in South Australia on the property owner as at midnight on the 30th June each year.
- Western Australia also charge a Metropolitan Region Improvement Levy in addition to Land Tax on properties located in specified areas. That levy is 0.14% of the value over $300,000.
- Exemptions are available for Principal Places of Residence, Primary Production Land, and several other charitable uses.
Rate of Land Tax in Western Australia
Western Australia has a single tier of Land Tax charges that apply to all land owners irrespective of type. Land owned jointly is assessed separately, and therefore with a separate threshold, to land held jointly with others.
| General Land Tax Rates | No land tax up to $300,000.
$300 flat rate up to $420,000. $300 plus 0.25% of every dollar between $420,000 and $1,000,000. $1,750 plus 0.90% of every dollar between $1,000,000 and $1,800,000. $8,950 plus 1.80% of every dollar between $1,800,000 and $5,000,000. $66,550 plus 2.0% of every dollar between $5,000,000 and 11,000,000. $186,550 plus 2.67% of each dollar above $11,000,000. |
South Australia (CLICK HERE for more information)
- Land Tax is levied annually in South Australia on the property owner as at midnight on the 30th June each year.
- Exemptions are available for Principal Places of Residence, Primary Production Land, and several; other specified land uses such as religious, hospital, community, and other generally not for profit uses.
- Absentee owners are charged an Absentee Owner Surcharge of 1.5% from 1 January 2017 (previously 0.5%).
Rate of Land Tax in South Australia
South Australia has a single tier of Land Tax charges that apply to all land owners irrespective of type. Trustees holding land have apply to have land held on trust assessed separately than their other land holdings to ensure the value of those properties are not aggregated for Land Tax.
| General Land Tax Rates | No land tax up to $332,000.
$0.50c for every $100 or part thereof between $332,001 and $609,000. $1,385 plus $1.65 for every $100 or part thereof between $609,001 and $886,000. $5,955.50 plus $2.40 for every $100 or part thereof between $886,001 and $1,108,000. $11,283.50 plus $3.70 for every $100 or part thereof above $1,108,000. |
Australian Capital Territory (Click here for more information)
- Land Tax applies to all residential properties that are rented and all residential properties owned by a trust or company even if they are not rented.
- Commercial properties are not subject to Land Tax in ACT.
- Exemptions are available for retirement villages, religious use, several other not for profit land uses.
- Land tax is assessed quarterly as at 1 July, 1 October, 1 January, and 1 April each year.
- The calculation is based on the Average Unimproved Land Value over the previous 3 years.
Rate of Land Tax in ACT
| Land Tax Rates | Flat Fee $1,090 plus 0.41% up to $75,000.
$1,397.5 plus 0.48% between $75,001 and $150,000. $1,757.50 plus 0.61% between $150,001 and $275,000. $2,520 plus 1.23% over $275,000. |