Stamp duty and foreign resident capital gains withholding provisions from 1st July 2017

17 Jul 2017

The following changes apply to contracts entered into on or after 1 July 2017.

They do not apply to contracts entered into before 1 July 2017.

Stamp Duty Exemptions and Concessions for First Home Buyers

Eligible first home buyers purchasing a home with a dutiable value of less than $600,000.00 are exempt from paying stamp duty on the purchase of that home.

Eligible first home buyers purchasing a home with a value between $600,001.00 to $750,000.00 will be entitled to a concessional rate of duty. The concession will be greater where the value of the property is closer to $600,001.00.

First Home Owner Grant for Regional Victoria

A new increased First Home Owner Grant of $20,000.00 is available for first home-buyers who buy or build a new home valued up to $750,000.00 in regional Victoria.

Off-the-plan Concessions

From 1 July 2017, off-the-plan concessions (OTP Concessions) will only apply to buyers purchasing an off-the-plan property for the purpose of occupying the property as their home.

The OTP Concessions apply to purchasers who are eligible for:

1. a first home buyer stamp duty concession or exemption (available for purchases with a dutiable value of up to $750,000); or

2. a principal place of residence stamp duty concession (available for purchases with a dutiable value of up to $550,000).

The off-the-plan stamp duty concession deducts from the purchase price, the cost of any construction or refurbishment which occurs on or after the contract date.

Example:

Person A decides to buy a new apartment in an apartment block with a land value of $100,000.00 and a purchase price of $400,000.00. Construction on the apartment has not commenced. The value of the land plus improvements at the contract date (the dutiable amount) is $100,000.00. This is below the principal place of residence threshold for $550,000.00, meaning Person A is eligible for the off-the-plan stamp duty concession.

Foreign Resident Capital Gains Withholding

Where a foreign resident disposes of taxable Australian property, the purchaser is required to withhold a monetary amount being 12.5% of the purchase price. This is the Foreign Resident Capital Gains Withholding (FRCGW) tax. The purchaser must then remit the tax to the Australian Taxation Office (ATO).

From 1 July 2017, the FRCGW applies to Australian properties with a market value of $750,000.00 or more. Prior to 1 July 2017, FRCGW only applied to properties with a market value of $2,000,000.00 or more.

Unless a vendor provides the purchaser with a Clearance Certificate from the ATO, certifying that the vendor is not a foreign resident, the Purchaser must withhold 12.5% of the purchase price in transactions involving taxable Australian real property where that property has a market value of $750,000.00 or more.

Example One:

Person A is purchasing a property with market value of $650,400.00 from Person B. Person B is a foreign resident. The purchaser does not need to withhold any of the purchase price as the property has a value under $750,000.00.

Example Two:

Person A is purchasing a property with a market value of $800,000.00 from Person B. Person B has not provided a clearance certificate from the ATO and is deemed a foreign resident. Person A must withhold 12.5% of the purchase price being $100,000.00 and remit this amount to the ATO.

Example Three:

Person A is purchasing a property with a market value of $800,000.00 from Person B. Person B has provided a clearance certificate from the ATO. Person A does not need to withhold any of the purchase price as Person B is not a foreign resident.