Foreign persons includes natural persons and corporations.
For information on natural person see our Foreign Person page.
What is a Foreign Corporation?
A corporation is foreign where it is either:
- incorporated in a jurisdiction that is not an Australian jurisdiction; or
- a person who is a foreign person or a trustee for a foreign trust, or a number of such persons in combination:
- hold(s) 50% or more of the corporation’s shares; or
- is or are entitled to cast, or control the casting of, 50% or more of the maximum number of votes at a general meeting of the corporation.
Will any surcharge paid be refunded where a corporation ceases to be foreign?
A refund of a surcharge paid is available where:
- a corporation was foreign at the time of the acquisition of an interest in residential land, but then ceases to be a foreign corporation; or
- a person, or combination of people, who holds 50% or more shares or voting rights (see ‘what is a foreign corporation’ was a foreign person at the time of the acquisition of an interest in residential land, but then ceases to be a foreign person;
not more than 12 months after the interest in the residential land was acquired.
The foreign corporation can apply to RevenueSA for a refund of the foreign ownership surcharge if the corporation ceases to be foreign not more than 12 months after the acquisition of the interest. See Section 72(5) of the Stamp Duties Act 1923.
An Application for refund of stamp duty will need to be completed.
What happens when a corporation becomes a foreign corporation within 3 years after the acquisition?
The surcharge will be retrospectively imposed where a corporation becomes a foreign corporation within 3 years of the acquisition of the interest in residential land. Where this occurs:
- the Commissioner must be notified in writing that the person became foreign within 28 days
- a surcharge is payable on the instrument or, in the case of an acquisition under Part 4, the transaction
- the surcharge is to be regarded as having become payable when the corporation became a foreign corporation; and
- interest and penalty tax may apply as if the failure to pay the surcharge at the date of the acquisition were a tax default under the Taxation Administration Act 1996.
However, where a surcharge has been paid or is payable in respect of the transaction by virtue of which the corporation became a foreign corporation, the surcharge is reduced by the amount of the surcharge paid in respect of the transaction by virtue of which the corporation became a foreign corporation.
The reduction is in essence a rebate that ensures that 2 surcharges are not payable as a result of a transaction.
If a non-foreign corporation becomes a foreign corporation within 3 years, is it their responsibility to advise RevenueSA?
If within 3 years of the acquisition of the interest in residential land the acquirer becomes a foreign corporation, the Commissioner must be notified in writing within 28 days of becoming foreign.
The onus is on the acquirer to notify the Commissioner in writing within 28 days of becoming foreign.
When does the 3 year period for changing from non-foreign to foreign start?
The period starts from the date of acquisition of the property, that is, the settlement date.
How will RevenueSA monitor if a company becomes a foreign company within 3 years of purchasing a property?
RevenueSA’s Compliance Services branch obtains information from various sources, including the ATO, ASIC, FIRB, the Department of Home Affairs, the Department of Immigration and Border Protection. Such information can be used to identify potential tax defaults.
The onus is on the foreign person (which includes a company) to notify the Commissioner of State Taxation in writing of becoming a foreign person or foreign trust within 28 days of becoming foreign.
Is the surcharge payable if the corporation ceases to have the interest in the residential land prior to becoming a foreign corporation?
A surcharge is not payable if the interest in the residential land was conveyed or transferred by the corporation before the corporation became a foreign corporation.
If Australian Company A acquires land in February 2018 and pays no foreign ownership surcharge then Foreign Company B acquires a 50% interest in Company A in December 2018, what foreign ownership surcharge is payable?
See the example above about “Local2Global Pty Ltd” which provides an example of what foreign ownership surcharge is payable.
In summary, by virtue of Foreign Company B acquiring a 50% interest in Company A (a land holding entity), Company A becomes a foreign person (person includes companies) within 3 years of the acquisition of the residential land in February 2018.
As such, both landholder duty and the foreign ownership surcharge are payable on the 50% landholder acquisition (by Company B). Whilst foreign ownership surcharge is also payable on the full value of the February 2018 land acquisition (by Company A), the amount payable is reduced (with the reduction in essence being a rebate) by the foreign ownership surcharge paid in respect of the landholder acquisition.
When a foreign person signs a contract but their representative (for example, Attorney) provides the VOI and Client Authorisation without Visa/Passport information on the purchaser, how are required information fields for Commonwealth Reporting to be completed?
You will need to request the relevant information about the purchaser (not the Attorney).
When does a corporation hold property?
A corporation holds property (including a security of a corporation) if the corporation:
- is registered as the holder
- is beneficially entitled to the property; or
- controls the exercise of rights attached to the property.
When contacting us please provide your property information (such as address, ownership number, site details, etc) and conveyancer information, where applicable.
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