When is foreign purchase additional duty (FPAD) payable?


When is foreign purchase additional duty (FPAD) payable?

If you’re purchasing residential property in Victoria as a foreign purchaser, you will have to pay land transfer duty (formerly called stamp duty). Land transfer duty is a government tax applied when anyone purchases property unless an exemption applies. In addition to land transfer duty, foreign purchasers may also have to pay a foreign purchase additional duty (“FPAD”).

What is a foreign purchaser?

In Australia, you are considered to be a foreign purchaser if you are a foreign natural person, corporation or trustee of a foreign trust.

A foreign purchaser may be liable to pay a foreign purchaser additional duty to the State Revenue Office when;

  • purchasing a residential property;
  • purchasing a non-residential property and intending to convert it to residential property;
  • receiving a residential property as a gift; or
  • there is a requirement under certain leasing arrangements in respect of residential property.

What is a foreign natural person?

A foreign natural person is a purchaser who is not:

  • an Australian citizen;
  • a permanent resident of Australia; or
  • a New Zealand citizen holding a Special Category Visa (subclass 444).

It is important to note that the New Zealand citizen must be physically present in Australia at the time of settlement, or their visa will cease and they will be considered as a foreign purchaser.

What is a foreign corporation?

A foreign corporation includes corporations that are incorporated outside of Australia or in Australia if a foreign natural person, corporation or trustee of a foreign trust has a controlling interest in the corporation.

What is a foreign trust?

A foreign trust is a trust that has a foreign natural person, corporation or trustee of another foreign trust that has a substantial interest in the trust estate.

Potential foreign purchase additional duty (FPAD) exemptions

There are a number of current exemptions available to FDAP, which we explain below.

Where partner or spouse is Australian

An FPAD exemption may apply if a property is purchased by a foreign natural person as their principal place of residence, with their partner who is:

  • an Australian citizen; or
  • a permanent resident of Australia; or
  • a New Zealand citizen holding a special category visa.

The purchasers must move into the property within 12 months of settlement, and they must live in the property for a minimum continuous period of 12 months.

Build to rent exemptions

Currently, the Victorian government has provided an initiative to encourage “build to rent” properties. As part of this initiative, exemptions to FDAP are provided to certain foreign entities that meet the government’s criteria.

The exemption applies to:

  • foreign corporations; and
  • foreign trusts,

that are Australian-based and whose purpose is to develop or redevelop property which will add to the supply of housing in Victoria.

Get help from a property lawyer

It’s important to be aware of any government duty obligations, both land transfer duty and foreign purchase additional duty, if you are a foreign natural person purchasing land in Victoria.

At David Davis, our team are highly experienced in all aspects of conveyancing and property law. Please contact us for advice and assistance regarding any property transactions.

Contact David Davis Lawyers

Phone: 03 9014 1299

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