By Paul McKenzie
In the last 18 months or so, the federal and state governments have cracked down on foreign ownership and set in new regimes, new taxes, targeting foreign non-resident persons, companies and trusts etc who classified as “foreign non-resident”.
Under the Australian Taxation Office (ATO) requirements, Vendors selling properties of sale prices $750,000.00 or more, now require a Vendor clearance certificate, to avoid the 12.5% vendor foreign non-resident exit tax, for foreign non-residents, foreign company or trusts.
As a property buyer, same rules apply, as the two-large population multicultural states of New South Wales and Victoria, now have foreign non-resident stamp duty surcharges and land tax.
So, what is a “foreign non-resident” – a person, company or trust that is not predominately lived or based Australia, paying local Australian based taxes (such as income tax, GST in purchases etc), but is rather living or based abroad/overseas, also paying taxes abroad/overseas.
Example 1, a person, if they hold foreign citizenship, but have permanent status from Australian immigration been living and based in Australia (working and / or studying) for at least 220 days, paying local Australian based taxes, then they are not a “foreign non-resident”.
Example 2, a person or couple with New Zealand citizenship with special privileges status under Australian law, been living and based in Australia (working and / or studying) for at least 220 days, paying local Australian based taxes, then they are not a “foreign non-resident”.
Example 3, company joint venture, company consortium or trust, that is majority based and owned (more than 50%) in Australia, for at least 220 days, paying local Australian based taxes, then they are not a “foreign non-resident”.
Since these new regimes have come into force, there is a number of issues to consider. The main three issues to point under the new regime, in property buying, is as follows –
- Citizenship of other countries living in Australia as permanent residents for over 220 days, who do not have official permanent resident visas to prove (been Australian residents for many years and did not require a visa on those days to arrive and live here permanently). This situation is more common with our New Zealand friends with special New Zealand Citizenship status. As well as those migrants, who arrived in Australia prior to 1948, as “British Subjects”, when there was no Australian Citizenship Act. They can still buy Australian property, by providing a “Certificate of International Movement Record” by Australia’s Home Affairs Department (formerly the Immigration & Border Security Department), to provide they have been living in Australia for at least 220 days and deemed as permanent resident in Australia, living and based in Australia (working and / or studying) for at least 220 days, paying local Australian based taxes. For more information about the Certificate of International Movement, go to https://www.homeaffairs.gov.au/Forms/Documents/1359.pdf
- Australia Citizens Be Aware when Living Abroad / Overseas – You are deemed as Foreign Non-Resident !
ATO tax rulings since 1st July 2017, have Australian citizens living abroad, caught up being deemed as “foreign non-resident” and caught up paying the 12.5% vendor foreign non-resident exit tax. The ATO ruling is, is that if the Australian citizen living abroad (work and / or study, paying local taxes to another country they based living in), then they too deemed as “foreign non-resident”, regardless if it the former principal place of residence in Australia, or an investment property in Australia. The rule is, if you move and live overseas, you are then deemed as a “foreign non-resident”. Australian citizens living abroad also face the consequences with New South Wales and Victorian state government, to pay “foreign non-resident” stamp duty surcharges and land tax, with buying Australian property in those states.
- Australian Companies and Trusts Be Aware when you majority base shifts from Australia to Overseas – You are deemed as Foreign Non-Resident !
Point 2 above for Australian Citizens moving overseas, also affects companies and trusts, whose majority base shifts from Australia to overseas. They too are deemed, now as foreign non-resident and caught up paying the 12.5% vendor foreign non-resident exit tax.
Australian companies and trusts now having a majority base overseas, also face the consequences with New South Wales and Victorian state government, to pay “foreign non-resident” stamp duty surcharges and land tax, with buying Australian property in those states.
Written by Paul McKenzie – CEO of ABS Conveyancing & Valuations, in Sydney. He is on the management committee for the Australian Institute of Conveyancers NSW and the Sydney CBD Chamber of Commerce. Paul is also a member of the Australian Property Institute and the Australian Indian Chamber of Commerce NSW. He is a property writer, guest speak on conveyancing and has made guest appearances on radio. Paul has done immigration law studies at the Australian National University (ANU), a law graduate from Macquarie University, a Professional Certificate in Property Law from Sydney University and Bachelor of Commerce in Land Economy/Property Valuation from Western Sydney University Hawkesbury.
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