What property transactions are liable for the surcharge?

The surcharge applies to acquisitions in an interest in residential land.

The most common examples of an acquisition of an interest in residential land are:

  • a purchase of residential land or part of residential land; and
  • acquiring or increasing a prescribed interest in a land holding entity, being a company or unit trust scheme, which holds residential land.

This includes:

  • “Every day” transfer of land
  • Off the plan apartment
  • Vesting of an interest in a unit subsidiary
  • Transfer of a leasehold interest
  • Assignment of interest in a contract
  • Easement
  • Option to purchase

In addition, the granting of an option to acquire land, and an assignment which assigns a named purchaser’s interest in a contract for the sale of land to a transferee, also give rise to an acquisition of an interest in residential land.

However, if the interest in land acquired by a foreign person or trust is not liable to duty, the acquisition is also not liable to the surcharge.

Example 1

The will of Andrew provides for the transfer of residential land to his sister, Beatrice, a foreign person. As a transfer of the residential land to Beatrice pursuant to the will is not liable to duty, a surcharge would not be payable.

Are acquisitions that are exempt from duty still liable to the surcharge?

The surcharge only applies to acquisitions of an interest in residential land that are liable to stamp duty.

What is residential land?

Land is taken to be residential land if the Commissioner of State Taxation (the “Commissioner”), after taking into account information provided by the Valuer-General, determines that:

  • it is being predominantly used for residential purposes; or
  • although the land is not being used for any particular purpose at the relevant time the land should be taken to be used for residential purposes due to improvements that are residential in character having been made to the land; or
  • the land is vacant, or vacant with only minor improvements, that the land is within a zone established under the planning and development law of this State that envisages the use, or potential use, of the land as residential, and that the land should be taken to be used for residential purposes due to that zoning (subject to the qualification that if the zoning of the land indicates that the land could, in a manner consistent with the planning and development law, be used for some other purpose (other than for primary production) then the vacant land will not be taken to be used for residential purposes).

The date that is relevant to a determination as to whether land is residential land is:

  • the date of the relevant instrument; or
  • in the case of an acquisition under Part 4, the date of the relevant transaction.

For further information regarding whether land is taken to be used for residential purposes, please refer to Information Circular No. 103.

Does the foreign ownership surcharge apply to transfers of entitlements under a community plan (for example, carpark entitlements to a residential apartment)?

Yes. This is considered to be within the definition of residential land.

Is residential land used for a commercial purpose liable to duty and the surcharge?

Where land constitutes residential land but is nonetheless used for a commercial purpose, Information Circular No. 103 states:

“A further exception is in relation to land which although coded as residential by the Valuer-General will nevertheless be considered by the Commissioner to be commercial in nature. This treatment will be consistent with the Local Government zoning of the land. Land uses that fall into this category are Hostels, Hotels, Motels, Serviced Apartments and short term unit accommodation.”

The land referred to above will not be considered to be residential land.

However, the exception discussed in Information Circular No. 103 does not extend to Retirement Villages, Aged Care Facilities and other residential premises where the accommodation can best be described as 'long term accommodation'.

Residential land used for the commercial purpose of providing long term accommodation is not considered to be qualifying land. Accordingly, where such land is acquired by a foreign person or trust, the surcharge will apply.

Does the surcharge apply where the residential land is not acquired as an investment?

The surcharge is payable irrespective of whether or not the land is being acquired for investment purposes.

Is a Licence to Occupy residential land prior to settlement acquiring an interest in land?

If a purchase price has been paid, an interest in residential land has been acquired by the foreign person, such that duty and the foreign ownership surcharge are payable.

If no Transfer has been executed to stamp, then Section 71E of the Stamp Duties Act 1923 (‘transfers otherwise than by dutiable instrument). A Section 71E Statement (PDF 49KB), including the duty for the foreign ownership surcharge, must be lodged and stamped. This can be stamped on RevenueSA Online.

For example, a purchaser pays the purchase price for the property but delays signing a Transfer, paying stamp duty or lodging anything with the Lands Titles Office until Australian residency is acquired (say, in 18 months) and in the interim occupies the residential land under licence.

A Licence to Occupy or a Caveat in this scenario will not negate the requirement for a Section 71E statement.

Does the foreign ownership surcharge apply to Licence to Occupy transactions (for example, Fisherman Bay)?

Where the licence relates to residential land, the Foreign Ownership Surcharge will apply.

How does the surcharge apply to acquisitions of an interest in both residential land and non-residential land?

Where an interest in both residential land and non-residential land is acquired, the surcharge only applies to the acquisition of the interest in residential land. The surcharge is not payable on the acquisition of the interest in non-residential land.

Example 2

On 1 February 2018, Zac, a foreign person, acquires 100% of Land Pty Ltd, a land holding entity and is liable to land holder duty under Part 4. Land Pty Ltd holds both residential and non-residential land (for example, primary production land).

Whilst the land holder duty payable is calculated on the entire value of Land Pty Ltd's underlying land, being both residential and non-residential land, the surcharge additionally payable is calculated by reference to the residential land only.

Does the surcharge apply to a Section 71E Statement?

The surcharge may apply to a Section 71E Statement.

Section 71E relevantly applies to transactions which result in a change of ownership in residential land where the transaction is not effected (or not wholly effected) by an instrument on which duty is chargeable, but had it been so effected by an instrument, the instrument would be chargeable with duty. When such a transaction occurs, a statement must be lodged and duty is payable on the statement as if it were a conveyance effecting the transaction to which it relates.

Example 3

Greta, a foreign person, holds residential land. Greta subsequently declares that she holds the residential land on trust for a discretionary trust of which she is an identified object. No written declaration of trust, transfer or other instrument liable to duty is effected.

As such, the trust is a foreign trust and an interest in residential land is acquired by a foreign trust. In the absence of any other instrument, a Section 71E statement is required and both duty and the surcharge are payable.

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