- Increased auditing by Revenue NSW requires solicitors to exercise extra care when acting for ‘foreign persons’ in transactions involving real property.
- To avoid clients incurring unexpected additional liabilities, solicitors should provide advice on whether or not the client is a foreign person as defined by the legislation and if so, the additional liability and/or any options to mitigate it.
In recent years, auditing by Revenue NSW has resulted in increased enforcement of the Purchaser Surcharge Duty and Surcharge Land Tax, along with interest and penalties, on foreign buyers of residential property in NSW. As a result, some buyers who did not appreciate that they were ‘foreign persons’ under the relevant legislation, have been required to pay outstanding duty and land tax, together with interest and penalties.
This trend highlights the need for solicitors to exercise particular care when acting for foreign purchasers in order to avoid clients incurring unexpected liabilities. It is important that solicitors understand the legislative requirements and recognise when a client will be deemed to be a foreign person so that full and proper advice can be given in relation to any likely additional liability and whether it is open to take steps to reduce or mitigate that potential liability.
What is the Purchaser Surcharge Duty?
The Purchaser Surcharge Duty is an 8 per cent surcharge payable on the taxable value of any residential land that is purchased by a person who is classified as a ‘foreign person’. The Purchaser Surcharge Duty applies in addition to stamp duty. The relevant date for incurring liability for the Purchaser Surcharge Duty is the date of the transaction, generally being the date of purchase or auction of the residential property.