Tom Cantwell, Partner Property, Melbourne. Melbourne Sydney Brisbane Canberra Perth

Transcription

1 Tom Cantwell, Partner Property, Melbourne Melbourne Sydney Brisbane Canberra Perth 1

2 Foreign Purchaser Additional Duty (FPAD) Absentee Owner Surcharge (AOS) Victorian budget measures impacting property Federal budget measures MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 2

3 Foreign Purchaser Additional Duty (FPAD) Imposes FPAD on purchases of residential property by foreign persons Rate 4% from 1 July 2015, now 7% since 1 July 2016 based on contract (or nomination) date Total rate of duty therefore 12.5% above $960,000 Calculated on the full purchase price, including GST and ignoring concessions, eg off the plan If multiple owners - then on proportion acquired Exemptions still apply MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 3

4 Residential Property is property capable of lawfully being solely or primarily used for residential purposes Includes vacant land if there is an intention to construct one or more residences Includes commercial properties if there is an intention to convert or refurbish them into one or more residences Intention is important Change of intention - requirement to give notice within 14 days and pay duty within 30 days Excludes commercial residential premises (as defined in the GST Act), retirement villages and residential care facilities Includes indirect acquisitions, if landholder duty applies MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 4

5 Foreign purchaser, Person who is NOT any of the following a) an Australian citizen; b) the holder of a permanent residency visa; c) a New Zealand citizen Corporation more than 50% foreign owned or controlled or incorporated outside Australia Trustee of a trust with more than 50% interest held by a foreigner Discretionary beneficiaries have maximum possible percentage, ie usually 100% Expressly exclude all categories of foreign persons before acquiring residential property (cf FIRB) MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 5

6 Treasurer may exempt person who has a controlling/substantial interest Treasurer has issued guidelines Corporations and trusts not intended to be captured under surcharge are those corporations and trusts that are Australian-based and whose commercial activities add to the supply of housing stock in Victoria Be careful as to who needs exemption Last offshore entity Provide corporate structure Provide information on each of the areas in the guidelines Key issues: Scale of operations and number of employees MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 6

7 Form 62 Purchaser Statement - required on lodgement of transfer One for each purchaser Backed by penalties for misleading statements Increased data matching, particularly with ATO responsible for FIRB Notification on indirect purchases Notification on change of intention MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 7

8 Victoria New South Wales Queensland Commenced 1 July June October 2016 Rate 7% 4% 3% Change of intention Yes No No Change of residency No No Yes Controlling Interest More than 50% At least 20% At least 50% Exemption regime Yes No Yes MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 8

9 Absentee Owner Surcharge (AOS) Payable by absentee owners on all types of properties Residential, residential development, industrial, commercial office, retail, hotels, motels, student accommodation, etc, etc Rate 0.5% from 1 January 2016 Rate 1.5% from 1 January 2017 Added to standard scale above zero threshold For non trust landowners from $250,000 site value For trust landowners from $25,000 site value in addition to 0.375% trust surcharge so 1.875% from $25,000 to $250,000, increasing Usual exemptions apply: PPR, Farms, etc MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 9

10 An absentee person who is an owner of land Absentee person: Not an Australian citizen or permanent resident, or NZ citizen; and Does not ordinarily reside in Australia; and either Absent on 31 December or Absent for more than 6 months Absentee corporation Incorporated outside Australia Absentee controls more than 50% of votes or issued capital or Board A trustee of an absentee trust, if at least one absentee beneficiary: has a beneficial interest in land subject to a fixed trust is a unitholder in a unit trust scheme is a specified beneficiary of a discretionary trust MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 10

11 Treasurer may exempt person with controlling interest in an absentee corporation (not people or trusts) Treasurer has issued guidelines Corporations not intended to be captured under surcharge are those which conduct a commercial operation in Australia and whose commercial activities make a strong and positive contribution to the Victorian economy and community by engaging local labour and utilising local materials and services Key Issues: Substantial business/development activity vs passive ownership Directly engaging labour versus indirectly MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 11

12 Although no exemptions, there are: Excluded Trusts Public unit trust scheme - A listed trust, eg a REIT - Widely held trust as defined in Duties Act, but with 50 members - Registered imminent/declared public unit trust scheme Wholesale unit trust scheme registered under Duties Act Also: administration trust or child maintenance trust But no exemption for foreign listed companies MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 12

13 Natural person to the extent of interest in land Corporation on whole land value if >50% (otherwise nil) Fixed or Unit Trust to the extent of beneficiary s interest Discretionary trust on whole land value Flat 1.5% of land value in each case (2017 on) Trusts from $25,000 land value Natural persons/corporations from $250,000 land value Maximum rate of 3.75% (vs 2.25%) NSW also introduced AOS at.75% on residential land MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 13

14 On acquisition in Form 62 SRO requirement to register online for existing Ability to specify interests in fixed/unit trusts for flow through to beneficiaries SRO has advised it intends to increase compliance activity this year Self disclosure may lead to reduced/no penalties MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 14

15 It is possible to disclose, object and request an exemption in one go No formal review process of exemption applications Possible to object to assessment on basis that exemption should have been granted and it will be reviewed Usual TAA process applies, 60 days to lodge Potential review rights to VCAT and Supreme Court MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 15

16 Foreign person Australian citizen 50% 50% Australian company NO FPAD or AOS as no foreign/absentee control Residential property MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 16

17 Foreign person Australian citizen 60% 40% Australian company Full FPAD at 7% and AOS at 1.5% per annum as there is foreign/absentee control Residential property MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 17

18 Foreign person Australian citizen 50% 50% Australian Trust No FPAD but AOS at 1.5% per annum on 50% of site value Residential property MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 18

19 Foreign person Australian citizen 60% 40% Australian Trust Full FPAD at 7% and AOS at 1.5% per annum on 60% of site value Residential property MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 19

20 Foreign person Australian citizen 40% 60% Residential property FPAD at 7% on 40% of the price and AOS at 1.5% per annum on 40% of site value MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 20

21 Off the plan concession changes All foreign purchasers and all investors lose the off the plan concession. Applies to contracts and nominations signed from 1 July 2017 Only available to owner occupiers entitled to PPR and FHO concessions Key Thresholds PPR $550,000 FHO $600,000, potentially $750,000 However these are land values (potential 4x multiple) Effective rate of 12.5% duty for foreign residential investors, developers Loss of off the plan for all local investors of commercial, industrial, retail and residential properties MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 21

22 Vacant residential land tax New charge of 1% of capital improved value from 1 January 2018 Applies to residential land, including vacant land, but not commercial residential premises (as defined in the GST Act), retirement villages and residential care facilities Only in CBD and surrounding municipalities: Banyule City Council Bayside City Council Boroondara City Council Darebin City Council Glen Eira City Council Hobsons Bay City Council Manningham City Council Melbourne City Council Monash City Council Moonee Valley City Council Maribyrnong City Council Moreland City Council Port Phillip City Council Stonnington City Council Whitehorse City Council Yarra City Council MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 22

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24 Vacant if not used and occupied for 6 months (in aggregate) in a calendar year by: the owner or a permitted occupant as their PPR a natural person under a lease or short term letting arrangement made in good faith and not for the purpose of avoiding the payment of vacant residential land tax 2 years from issue of a building permit allowed for renovation - possible extensions for genuine delay Exemptions: Holiday home exemption one only, for owners with a PPR in Australia, 4 weeks use and the Commissioner is satisfied Business Use - for owner s with a PPR in Australia, and use the land as a residence for the purpose of attending their place of business or employment in the specified geographic area for more than 140 days in a year Land that has changed ownership in the preceding tax year Land which became residential during the preceding tax year MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 24

25 First home owner grants, exemptions and concessions FHOG of $10,000 continues for new homes up to $750,000 value Increased duty concessions from 1 July 2017: No duty for first homeowners to $600,000 Concessional duty phased in from $600,000 to $750,000 Based on dutiable value, ie off the plan value Members of Defence Force exempted from residence requirement Regional Victoria gets doubling of FHOG to $20,000 for new homes for contracts entered into from 1 July 2017 for new homes up to $750,000 value MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 25

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28 Spousal transfer duty exemption limited to PPR from 1 July 2017 Enforcement: Increases in penalties New offences for not providing all information or providing misleading information, or omitting to provide information without reasonable excuse Directors and officers of corporate are personally liable if they fail to exercise due diligence potential criminal liability Get advice and retain a copy MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 28

29 GST on new residential property transactions: From 1 July 2018, purchasers of newly constructed residential properties will be required to remit the GST directly to the ATO as part of settlement. There has been no mention of a change to the calculation of GST, so the GST will presumably remain 1/11th of the contract price or 1/11th of the margin, if the margin scheme is employed. Annual charge on foreign home owners who leave property vacant New Commonwealth annual charge on foreign owners of residential property where the property is not occupied or genuinely available on the rental market for at least six months per year Equal to FIRB application fee - starts from $5,000 for properties up to $1,000,000 in value, then increasing to $10,100 and so on Apply to properties the subject of foreign investment applications lodged from 7.30pm on 9 May 2017, so will not apply to existing owners MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 29

30 Expansion of capital gains tax withholding regime Increases the withholding tax rate from 10% to 12.5% Lowers the threshold from $2 million to $750,000 Significantly extends the number of transactions subject to the regime For settlements from 1 July 2017 No CGT main residence exemption for foreign investors for properties purchased from 7.30pm on 9 May Any currently owned properties will be grandfathered until 30 June Tightening of foreign resident CGT principal asset test Now calculated on an associate inclusive basis from 7.30pm on 9 May 2017 for foreign tax residents with indirect interests in Australian real property. MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 30

31 Trimming Deductions for residential investors From 1 July 2017 deductions for depreciation of plant and equipment will be limited to outlays actually incurred and there will be no deductions for travel to inspect, repair or collect rent Contributing the proceeds of downsizing to superannuation A person aged 65 or over will be permitted to make a non concessional contribution of up to $300,000 (or $600,000 for a couple) from the proceeds of selling their home from 1 July 2018, provided they have owned it for 10 or more years. These contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million balance test for making non concessional contributions. MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 31

32 First home super saver scheme From 1 July 2107, first home buyers can salary sacrifice up to $15,000 per year to a total of $30,000 to their superannuation (effectively $60,000 for a couple) and redraw it, along with any associated earnings, to buy a first home. The New Dwelling Exemption Certificate from FIRB will be amended to cap foreign ownership in new developments at 50%. This condition will be applied to applications made from Budget night. Various adjustments to FIRB fees and rules to fix inconsistencies MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 32

33 Tom Cantwell Partner, Property Mills Oakley Level 6, 530 Collins Street Melbourne VIC 3000 Phone: Mobile: MELBOURNE SYDNEY BRISBANE CANBERRA PERTH 33

34 Melbourne Level Collins Street Melbourne VIC 3000 T: F: Canberra Level Marcus Clarke Street Canberra ACT 2601 T: F: Sydney Level George Street Sydney NSW 2000 T: F: Perth Level St Georges Terrace Perth WA 6000 T: F: Brisbane Level Ann Street Brisbane QLD 4000 T: F: Disclaimer This PowerPoint presentation is intended to provide only a limited analysis of the subject matter covered. It does not purport to be comprehensive, or to provide legal advice. Any views or opinions expressed are the views or opinions of the presenter, and not those of Mills Oakley as a Firm. Readers should satisfy themselves as to the correctness, relevance and applicability of any of its content, and should not act on any of it in respect of any specific problem or generally without first obtaining their own independent professional legal advice. 34