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An introduction to Foreign Transfer Duty

Nov 7, 2021

Did you know? On 1st January 2019, there was a jurisdiction in Western Australia (WA) that ‘foreigners’ purchasing a residential property in WA must pay an additional 7% in Stamp Duty?

When a residential property is acquired by a foreign person, certain rules and regulations impact the transactional implications surrounding Stamp Duty surcharge or Foreign Transfer Duty. The Foreign Transfer Duty becomes effective from the day the document for the transaction is signed.

Let us discuss the key important highlights of the foreign transfer duty:

Firstly, what is a residential property? Residential property is marked out for solely residential purposes. It is defined as a land located in Western Australia that can be or is capable of being used for only residential reasons. A residential property can be a vacant or substantially vacant land in Western Australia.

What is the definition of a foreign person?

There are 3 primary definitions:

  • A foreign individual –This is an individual who doesn’t have an official citizenship of Australia unless they possess a permanent or special category visa as stated by the Department of Home Affairs.
  • A foreign corporation –This is when a corporation was integrated outside Australia or is governed primarily by foreign people.
  • A foreign trustee –This is when a trustee is of a foreign trust. 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.

 What are the exclusions to residential properties from Foreign Transfer Duty?

  • Old care facility: If the land is intended to be used only for the objective of an aged care facility as specified in the Land Tax Assessment Act 2002 section 38A(1).
  • Commercial residential purposes: A land that is foreseen 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.
  • Retirement village: If the land is deemed to be used for the purposes of a retirement village as mentioned the Retirement Villages Act 1992 section 3(1).

What transactions are subjected to Foreign Transfer Duty?

  • Transfers of dutiable property to a beneficiary of a trust
  • Transfers to a real purchaser
  • Transfers between spouses or de facto partners
  • Purchasing of a discretionary trust

You need to complete a Foreign Buyers Duty declaration

Every person acquiring an interest in land or in a landholder in Western Australia must complete a declaration form (please note you must complete a declaration form even if you’re not a foreign person). You can acquire the forms here: https://bit.ly/3t6ksln.

At Essence Conveyancing, we are ready to handle your concerns and ensure that your settlement process is as seamless as possible. If you have any questions about settlement don’t hesitate to get in touch!

Disclaimer: Please note, the contents of this article do not constitute conveyancing advice, are not intended to be a substitute for conveyancing advice and should not be relied upon as such. You should seek conveyancing advice or other professional advice in relation to any particular matters you or your organisation may have. To find out more, please contact us.