2 March 2023
by David Prichard
- Related topics
- Personal Tax & Superannuation
Revenue NSW Office of State Revenue (OSR) has quietly done a back flip on the much-vaunted surcharge provisions which apply when a foreign person acquires a property in NSW (surcharge purchase duty) and, or holds a property (surcharge land tax).
The imposition of the surcharge duty was designed to impact foreign persons acquiring property in NSW (other states also introduced similar provisions) and therefore give Australians an advantage, however, in reality it was a simple tax grab.
In a backflip late last week it was announced that the NSW surcharge provisions are inconsistent with certain international treaties entered into by the Federal Government. As such, citizens of New Zealand, Finland, Germany, or South Africa could be impacted and be entitled to a refund of surcharge duty or surcharge land tax.
In addition, entities (corporations, trusts etc) that are affiliated with New Zealand, Finland, Germany or South Africa may also be entitled to a refund. Revenue NSW have provided little guidance on this except to state that “Refunds may be available for purchasers/transferees, and landowners, from the nations concerned who paid surcharge purchaser duty or surcharge land tax on or after 1 July 2021.”
Whilst it is understood that Revenue NSW will be actively seeking out those who are due a refund, taxpayers may wish to review their circumstances and contact NSW to help accelerate the process. The guidance to date indicates that refunds would be available for acquisitions on or after 1 July 2021.
There are a variety of non-discrimination clauses contained within the international tax treaties and therefore it is anticipated that additional countries will be identified moving forward.
The introduction of the surcharge duty forced discretionary trusts holding residential real estate to make an irrevocable change to the trust deed to limit beneficiaries to avoid the surcharge. Given that the changes to the deeds had to be irrevocable, this puts the trusts and therefore the beneficiaries at a commercial and practical disadvantage. It will be interesting to see whether Revenue NSW provides any guidance as to the impact of this and whether any concessions will be forthcoming.
Whilst there have been no announcements from the other States and Territories as yet, it is understood Victoria is currently considering its position. NSW is unlikely to be alone in announcements on this matter.
If this change impacts you – please reach out to your ESV Engagement Partner for assistance.