Foreign purchaser additional duty and absentee owner surcharge

Learn about the extra taxes and surcharges that apply to foreign buyers and absentee owners in Victoria.

Foreign Purchaser Additional Duty

In Victoria, foreign purchasers are required to pay an additional duty on top of the standard land transfer duty, which is commonly known as stamp duty. This is referred to as the Foreign Purchaser Additional Duty or FPAD. The surcharge applies to the purchase of residential property, including homes, apartments, and land intended for residential development. The rate of this duty is set by the Victorian government and is subject to change, so you should check the State Revenue Office Victoria website for the most recent figures. This extra cost can significantly increase the total amount of capital required for your acquisition.

The FPAD is calculated as a percentage of the market value of the property or the purchase price, whichever is greater. It is important to account for this expense in your budget early, as it is usually payable at the same time as the standard duty, which is typically at settlement. There are very limited exemptions to this duty, and they often apply to specific types of commercial or industrial developments that have a residential component. Most individual buyers moving to Victoria from overseas will need to factor this additional cost into their financial planning to avoid a shortfall of funds at settlement.

The Absentee Owner Surcharge

Beyond the initial purchase duty, foreign owners may also be subject to an ongoing tax known as the Absentee Owner Surcharge. This surcharge is an additional amount of land tax that applies to Victorian land owned by an absentee person, an absentee corporation, or an absentee trust. An absentee person is generally defined as someone who is not an Australian citizen or permanent resident, does not ordinarily reside in Australia, and was absent from Australia for a specific period in the previous calendar year. This tax is billed annually and is based on the total value of the land you own in Victoria.

The purpose of the surcharge is to ensure that owners who do not live in Australia contribute to the state's services and infrastructure. The threshold for land tax and the specific rate of the surcharge can vary, so it is necessary to consult the State Revenue Office Victoria for current rates. It is your responsibility to notify the State Revenue Office if you are an absentee owner. Failure to do so can result in penalty tax and interest charges. If your circumstances change and you move to Victoria permanently, you may no longer be classified as an absentee owner, but you must update your status officially.

Strategic Financial Planning

When you are relocating to Victoria, these tax obligations can represent a large portion of your transaction costs. It is not just the purchase price you need to save for, but also these significant state based levies. For example, on a property valued at several hundred thousand dollars, the combined duty could be tens of thousands of dollars more for a foreign buyer than for a local resident. You should use the calculators provided on the State Revenue Office website to get a precise estimate based on your specific residency status and the value of the property you intend to buy.

Engaging a Victorian conveyancer or solicitor who has experience with foreign buyers is vital. They will help you navigate the complex declarations required by the State Revenue Office during the transfer process. They can also advise you on whether any specific exemptions apply to your situation, such as those for New Zealand citizens on certain visas. Being proactive about these taxes ensures that you have a realistic view of your purchasing power and helps prevent legal complications during the settlement period. Always remember that tax laws can change with state budgets, so staying informed is an ongoing task.

• Calculate Foreign Purchaser Additional Duty
• Check current land tax thresholds
• Determine if Absentee Owner Surcharge applies
• Budget for settlement costs including all duties
• Notify the SRO of your residency status