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Navigating Foreign Transfer Duty in Western Australia

Feb 16, 2024

Since 1st January 2019, Western Australia has introduced an additional Stamp Duty surcharge known as Foreign Transfer Duty for non-Australian citizens purchasing residential property in the state. This change significantly affects the financial considerations for foreign buyers in the WA real estate market. In this guide, I’ll delve into what constitutes a residential property, define who qualifies as a foreign person under these regulations, and outline the specific exclusions and transaction types subject to this duty.

Understanding residential property in WA’s context

A residential property in Western Australia is defined as land primarily used or intended for residential purposes. This includes both vacant and substantially vacant land. The key criterion is the land’s potential or current use for residential living.

Defining a ‘foreign person’

The classification of a ‘foreign person’ is crucial in determining the applicability of the Foreign Transfer Duty. There are three main categories:

  • Foreign Individual: This refers to any person who is not an Australian citizen. Exceptions are made for Australian Permanent Residents and New Zealand citizens holding a special category visa as per the Department of Home Affairs guidelines.
  • Foreign Corporation: A corporation is classified as foreign if it is incorporated outside Australia or its controlling stake is primarily in the hands of foreign individuals.
  • Foreign Trustee: This applies to trustees of a foreign trust. Interestingly, even if a corporation or individual acting as a custodian for a foreign trust is not a foreign entity themselves, they are still classified as a foreign trustee under these rules.

Exclusions from Foreign Transfer Duty

Several types of properties are exempt from this duty:

  • Aged Care Facilities: Land designated exclusively for aged care facilities as defined in the Land Tax Assessment Act 2002 section 38A(1).
  • Commercial Residential Purposes: Properties intended for commercial residential use as per the A New Tax System Goods and Services Tax) Act 1999 (Cth) section 191-1.
  • Retirement Villages: Land earmarked for retirement villages, in line with the Retirement Villages Act 1992 section 3(1).

Transactions subject to Foreign Transfer Duty

The duty applies to various transactions, including:

  • Transfers of dutiable property to a trust beneficiary.
  • Transfers to a real purchaser.
  • Acquisitions within a discretionary trust.
  • Every buyer acquiring an interest in land in WA must complete a Foreign Buyers Duty declaration form, regardless of whether they are a foreign person. This form is essential for compliance and can be accessed here.

Essence Conveyancing: Your guide through the complex

At Essence Conveyancing, I understand the intricacies of these regulations and am equipped to guide you through your property transaction, ensuring compliance and a smooth settlement process. If you’re navigating the complexities of the Foreign Transfer Duty or have any queries about your settlement, our team is here to provide expert advice and support.

Feel free to reach out to us for any settlement-related inquiries – I am here to help you make informed decisions in the Western Australian property market.

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.