The recent jurisdiction in Western Australia (WA) states that from 1st January 2019, foreigners purchasing a residential property in WA must pay an additional 7% stamp duty. This dictate comes in WA after being introduced in the other Australian states. Stamp duty surcharge or Foreign Transfer Duty encompass certain rules and regulations when a residential property is acquired by a foreign person. The foreign transfer duty becomes effective from the day the document for the transaction is signed.
In this blog, we shall discuss some important highlights of the foreign transfer duty.
1. What is a residential property?
Residential property is defined as a land located in Western Australia that can be or is capable of being used for only residential reasons. Besides, it can also be a vacant or substantially vacant land in Western Australia that is marked out solely for residential purposes.
2. Who is a foreign person?
A foreign person can be any of these three:
A foreign individual – A foreign individual is someone who doesn’t have the citizenship of Australia unless they possess a permanent or special category visa as stated by the Department of Home Affairs.
A foreign corporation – If a corporation was integrated outside Australia or it is governed primarily by foreign people, the corporation is chiefly a foreign one.
A foreign trustee – As the name suggests, when the trustee is of a foreign trust, it is considered to be a foreign trustee. When a corporation or an individual operates as a custodian for a foreign trustee regardless of whether they are a foreign person or not, it is defined as a foreign trustee. Such a trust can be:
Controlled by a foreign person
One or more foreign people can hold at least 50% of the trust’s income and are takers in default along with their associates.
A trust besides a discretionary trust with one or more individuals holding at least 50% of the income of the trust.
3. What are the excluded residential properties from this duty?
Some properties are excluded from foreign transfer duty. These are:
If the land is intended to be used only for the objective of an old care facility as specified in the Land Tax Assessment Act 2002 section 38A(1)
A land that is deemed to be used for the purposes of commercial residential spaces as defined in the A New Tax System Goods and Services Tax) Act 1999 (Cth) section 191-1
If the land is intended to be used for the purposes of a retirement village as mentioned the Retirement Villages Act 1992 section 3(1)
4. Are there any transactions exempted from this duty?
If the entire or a part of a taxable transaction is exempted from transfer duty or chargeable with nominal duty, that same portion of the transaction will also be excluded from foreign transfer duty. It may be chargeable on the portion of the taxable value that is ineligible for the exemption or nominal duty.
The transaction exempted from this duty include:
– Partition of property
– Family court orders and financial agreements
– Cancelled transactions
5. Is foreign transfer duty applicable for two transactions related to the same acquisition?
The good news is foreign transfer duty is not charged if there are two dutiable transactions related to the same acquisition. This is applicable for the transfer of residential property if the agreement has already been approved for foreign transfer duty and the transfer is in accordance with the agreement. If the purchaser named on the agreement is a foreign person, the agreement will be charged with foreign transfer duty.
6. What kinds of transactions are subjected to foreign transfer duty?
– Transfers between spouses or de facto partners
– Purchasing of a discretionary trust
– Transfers of dutiable property to a beneficiary of a trust
– Transfers to a real purchaser
Conclusion: These are some vital information about foreign transfer duty and what all you should be of it. Moreover, you can avail of any conveyancing services in WA to know in greater detail about foreign transfer duty and whether your transaction qualifies for that. The settlement agents are aware of all the existing norms and procedures, thereby expediting your process. To know more about our settlement services, phone us on (08) 9586 9992.