Foreign Purchasers Take Note! Absentee Owner Surcharge
By Julia Thermos
17 January 2017
The absentee owner surcharge is an amount that is payable by an absentee owner in addition to land tax. As of 1 January 2017, the absentee owner surcharge increased to 1.5% of the total taxable value of your Victorian land holdings.
You are required to notify the State Revenue Office by 15 January the year after you become an absentee owner. Once you have notified the SRO, the surcharge will be included in your Victorian land tax assessment.
Failure to notify the SRO that you are an absentee owner is a notification default and you may be liable for penalty tax.
So, who is an absentee owner?
The definition is broad and includes:
1. An absentee individual, which is any person who:
Is not an Australian citizen or permanent resident; and
Does not ordinarily reside in Australia; and
Was absent from Australia on 31 December of the year prior to the relevant tax year or was absent from Australia for more than six months in total in the year prior to the relevant tax year.
2. An absentee corporation, which is a corporation:
That was not incorporated in Australia; or
Where an absentee person has a controlling interest.
3. A trustee of an absentee trust. An absentee trust includes:
A fixed trust where an absentee beneficiary has a beneficial interest in land subject to the fixed trust;
A discretionary trust where an absentee beneficiary is a specified beneficiary; or
A unit trust where a unit holder is an absentee beneficiary.
We note that an absentee beneficiary is:
An absentee individual;
An absentee corporation that:
Has a beneficial interest in land subject to a fixed trust; or
Is a specified beneficiary of a discretionary trust; or
Is a unitholder in a unit trust.
Any person who:
Has a beneficial interest in land subject to a fixed trust and holds that interest as a trustee of an absentee trust; or
Is a unitholder in a unit trust and holds units as trustee of an absentee trust; or
Is a specified beneficiary of a discretionary trust in the capacity as trustee of an absentee trust.
In very limited circumstances, an absentee person may apply for an exemption to the absentee owner surcharge.
The exemption may be granted, at the Commissioner’s discretion, to an absentee person that has a controlling interest in a company that is incorporated in Australia. Eligibility for the exemption is based around specific guidelines provided by the Treasurer, noting that the exemption is intended to operate on Australian-based companies that:
Conduct commercial operations in Australia;
Make a strong and positive contribution to the Victorian economy and community;
employ local labour; and
Use local materials and services.
We note that this information is general in nature and we strongly recommend that you obtain specific legal advice tailored to your particular circumstances.
For further information and specific advice please contact a member of our Property Law Team.
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