South Australian State Budget: The Stamp Duty Surcharge

If the Budget Measures Bill 2017 is passed as announced by the South Australian Parliament this afternoon the state will join many others in imposing a Stamp Duty surcharge on foreign purchasers of residential property.
A foreign individual, company or trustee that acquires a residential property in South Australia will pay an additional 4% in Stamp Duty on contracts entered into on or after 1 January 2018. This takes the maximum level of duty to 9½% dependent upon the consideration or market value of the transaction.

For example; a foreign person buying a $650,000.00 residence in South Australia will pay duty of $55,580.00 rather than the $29,580.00 that would be paid by an Australian purchaser.

It is important to understand that a foreign purchaser of a property is not just an individual who lives overseas and wants to hold Australian residential property as part of an international investment portfolio. RevenueSA indicate that for stamp duty purposes a foreign person will be defined as:

    an individual who is not an Australian citizen, Australian permanent resident or New Zealand citizen who holds a special category visa;
    a company incorporated outside Australia or a company in which at least 50% of the shares are held by foreign individuals, foreign companies or foreign trusts; and
    a trustee if any of the following are either foreign individuals, foreign companies or foreign trusts:
    • the trustee;
    • a person with the power to appoint a trustee under the deed;
    • an identified object (usually described as a beneficiary); or
    • a person who takes either income or capital in default.

Trust Issue

For some years the accepted wisdom has been to draft trust deeds with extremely broad classes of beneficiaries defined around a particular individual or individuals. There are various reasons why this is no longer ideal but the 2017 South Australian State Budget certainly provides another. If you are not a citizen, permanent resident of Australia or New Zealand citizen who holds a special category visa and you are identified in a trust deed as a potential beneficiary or default beneficiary the trust is deemed to be a foreign trust.
Anyone establishing trust structures with a view to holding residential property in South Australia should carefully consider who is identified in the deed before going ahead with the transaction. Similarly, those looking to expand property portfolios should consider whether a new trust structure would be of benefit to them.

Finally, while today’s budget makes no reference to land tax changes for foreign owners of land, both New South Wales and Victoria have legislated a land tax surcharge as well as duty surcharges for foreign landholders in their respective jurisdictions.