Tax Tip 170: Foreign Surcharge Exemption for Foreign Developers (NSW)

Tax Tip 170: Foreign Surcharge Exemption for Foreign Developers (NSW)

As you may be aware there are new stamp duty surcharges on ‘foreign persons’ who purchase land in NSW. There are also surcharges for land tax on land held by ‘foreign persons’.

However there are some concessions for ‘foreign persons who are developing new homes for sale.

See
Duty concession: section 104ZJA Duties Act 1997 (NSW)
Land Tax concession: section 5C Land Tax Act 1956 (NSW)


For more details see:
Revenue Ruling No. G 013 Exemption from Surcharge for New Home Development by Australian Based Developers that are Foreign Persons
Revenue Ruling No. G 013 | Revenue NSW

 

Applies to either limit surcharge duty and land tax or allows a refund subject to whom the property is transferred on completion. ie Not an associate.

I wonder what minimum scale and size is supposed to be to access this NSW concession ? The Ruling also appears open to a single house / lot where the FIRB view is larger (see below)

Other key issue is owner must be a company. No trusts. No individuals.

Corporations Act issues for a company would need to be complied with (ie one resident Director / Sec). Company would get benefit of land tax threshold (and no LT surcharge)

Foreign financing for such a development comes with many issues too eg withholding tax and perhaps thin capitalisation which may scale down interest deduction on foreign loans. The FIRB approval is also a key element. FIRB approval is needed for vacant land and for established dwellings proposed for demolition (since established dwellings are prohibited without approval). There is also a issue of any land that has ever had a dwelling on it may also require approval since it doesnt meet the vacant land rules under FIRB policies. The FIRB developer concession has a 50 property minimum