Skip to main content Go to home page

When you buy or acquire property in Victoria, you may have to pay land transfer duty (also known as stamp duty).

If you are a foreign purchaser and you acquire residential property, as well as land transfer duty you may have to pay foreign purchaser additional duty (additional duty) on the share of the property you acquired. 

If the property you acquired is exempt from land transfer duty, the additional duty does not apply. If the property you acquired is eligible for a land transfer duty concession, the additional duty is calculated on the dutiable value of the property before the concession is applied.

Foreign corporations and foreign trusts may, in some circumstances, be eligible for an exemption from additional duty.

Example 1: Exempt transfer

In his last will and testament, Joe bequeathed all his assets, including two properties in Victoria, to his sister Joan, a foreign natural person.

The transfer of the two properties to Joan, pursuant to Joe’s will, is exempt from land transfer duty so Joan is also exempt from paying additional duty.

If the property acquired is eligible for a land transfer duty concession, additional duty applies on the purchase price before the concession is applied. 

Example 2: Foreign purchaser additional duty applies

Kate, a foreign natural person, buys residential property off-the-plan for $500,000. She intends to live there as her principal place of residence (PPR). Kate is eligible for both the PPR concession and the off-the-plan concession.

Additional duty is payable even though land transfer duty concessions apply. Kate is liable for the additional duty calculated on the $500,000 purchase price.

Read our frequently asked questions for more information.

Foreign purchasers

You are a foreign purchaser if you are a foreign natural person, a foreign corporation or a trustee of a foreign trust.

Foreign natural persons

You are a foreign purchaser if you:

  • are not an Australia citizen
  • are not a New Zealand citizen with a Special Category Visa (Subclass 444). To hold this visa, the New Zealand citizen must be physically present in Australia, or
  • do not hold an Australian permanent residence visa. See our FAQs about permanent residence visas. 

Foreign corporations

A foreign corporation includes corporations incorporated:

  • outside Australia.
  • in Australia if a foreign natural person, another foreign corporation, or a trustee of a foreign trust has a controlling interest in those corporations.

Foreign trusts

A foreign trust is a trust where a foreign natural person, foreign corporation or trustee of another foreign trust, has a substantial interest in the trust estate of that trust.

When does additional duty apply?

Additional duty applies to any arrangement or transaction involving the transfer of an interest in residential property to a foreign purchaser, including:

  • Buying a residential property at, for example, auction or by private sale.
  • Buying a non-residential property with the intention of converting it to residential property.
  • Being given a residential property as a gift.
  • Certain leasing arrangements in respect of residential property.

Additional duty applies to the acquisition of residential property (or a relevant acquisition in a landholder that holds residential property) on or after 1 July 2015. However, you will not pay additional duty if the acquisition is the result of a contract you entered into on or before 30 June 2015. It applies even if you only acquire part of, or a part interest, in the property. Where a contract to purchase residential property is entered into before 1 July 2015 and you are nominated to take the transfer of the property on or after 1 July 2015, additional duty may apply to the transfer.

Exemption if you buy with your spouse or partner

If you are a foreign purchaser, you may be entitled to an exemption from additional duty if you purchase a principal place of residence jointly with your spouse/domestic partner who is an Australian citizen, Australian permanent resident or New Zealand citizen who holds a special category visa. You must, however, live in the property as your principal place of residence for a continuous period of 12 months, starting within 12 months of becoming entitled to possession of the property. If there are good reasons, you can ask us to vary this requirement to:

  • Reduce the 12-month residence period.
  • Determine that a temporary absence from the residence does not break the continuity of residence.
  • Extend the period in which the residence must begin.

This exemption is available for transfers from 14 June 2018.

Rates of additional duty

For contracts, transactions, agreements and arrangements entered into on or after:

  • 1 July 2015 but before 1 July 2016 (even if the settlement date is on or after 1 July 2016), the additional duty rate is 3%.
  • 1 July 2016, the additional duty rate is 7%.
  • 1 July 2019, the additional duty rate is 8%.

Nominations and sub-sale events

Additional duty will apply where a foreign purchaser is nominated to take a transfer of residential property, the nomination is executed on or after 1 July 2015 and it triggers a sub-sale event. This is the case even if the sale contract was entered into before 1 July 2015.  

Where a person is nominated to take a transfer under an off-the-plan contract, this arrangement will trigger a sub-sale event (as there has been land development). In this situation, land transfer duty is generally only charged on the transfer to the nominated person. Therefore, where a foreign purchaser is nominated to take a transfer of residential property under an off-the-plan contract and that nomination occurs on or after 1 July 2015, additional duty applies.  

Where a nomination does not trigger a sub-sale event (that is, there is no additional consideration and no land development), there is no subsequent transaction. This means the transfer of the property to the foreign purchaser is considered to have been entered into on the date of the contract and not the date of the nomination. Therefore, if the contract was entered into before 1 July 2015, additional duty does not apply.

Summary of transitional provisions for sub-sale transactions

Date contract entered into Nomination
(sub-sale event)
Transfer FPAD
Before 1 July 2015 Before 1 July 2015 On or after 1 July 2015 Nil
Before 1 July 2015 On or after 1 July 2015 but before 1 July 2016 On or after 1 July 2015 3%
After 1 July 2015 but
before 1 July 2016

On or after 1 July 2015 but before 1 July 2016

On or after 1 July 2015 but before 1 July 2016 3%
Before 1 July 2015 On or after 1 July 2016 but before 1 July 2019 On or after 1 July 2016 but before 1 July 2019 7%
After 1 July 2015 but before 1 July 2019 On or after 1 July 2016 but before 1 July 2019 On or after 1 July 2019 7%
Before 1 July 2015 On or after 1 July 2019 On or after 1 July 2019 8%

Calculating additional duty

The additional duty is calculated on the dutiable value of your share of the residential property, which is the greater of the price you pay for, or the market value of, the property prior to any land transfer duty concessions being applied.

You can calculate your total duty, including additional duty, by:

  1. Calculating the land transfer duty in the usual way, applying any relevant concessions.
  2. Calculating the additional duty on the dutiable value of the property (ignoring any concessions that reduce dutiable value).
  3. Adding the land transfer duty amount in step 1 to the additional duty amount in step 2 to determine the total duty amount payable for the transfer.

When you make a relevant acquisition in a landholder, duty is charged on the unencumbered value of the total landholdings of the landholder. If you make a relevant acquisition as a foreign purchaser, the additional duty surcharge will only apply to the interest you acquired in the landholder proportional to the landholder’s landholdings which comprise residential property.

Residential property

Residential property is:

  • Land capable of being used solely or primarily for residential purposes and that may be lawfully used in that way.
  • Land which includes a building, or part of a building, that a person intends to refurbish or extend so the land is capable of being used solely or primarily   for residential purposes and that may be lawfully used in that way.
  • Land:
    • On which a person intends to construct a building so the land is capable of being used solely or primarily for residential purposes and may be lawfully used in that way.
    • In respect of which a person has undertaken or intends to undertake land development for the purposes of:
      • constructing a building so the land is capable of being used solely or primarily for residential purposes and may be lawfully used in that way, or
      • enabling another person to construct a building so the land is capable of being used solely or primarily for residential purposes and may be lawfully used in that way.

Residential property does not include commercial residential premises, a residential care facility, a supported residential service or a retirement village and which may lawfully be used in that way.

Definitions

Refurbish means building work that requires a building permit to be issued under the Building Act 1993 for converting an existing building.

Land development means any one or more of the following:

  • Preparing a plan of subdivision or taking steps to have the plan registered under the Subdivision Act 1998.
  • Applying for or obtaining a permit under the Planning and Environment Act 1987 in relation to the use or development of the land.
  • Requesting a planning authority to prepare an amendment to a planning scheme that would affect the land.
  • Applying for or obtaining a permit or approval under the Building Act 1993.
  • Doing anything in relation to the land for which a permit or approval under the Building Act 1993 would be required.
  • Developing or changing the land in any other way that would lead to the enhancement of its value.

The definition of residential property ensures that these are residential properties:

  • Land containing a non-residential building that is purchased with the intent of converting it into residential premises, e.g. a foreign person purchases a disused warehouse with the intention of refurbishing the warehouse into residential apartments.
  • Residential premises that forms part of a non-residential building (e.g. a foreign person purchases a penthouse that forms part an office building).
  • Vacant land purchased for residential development where the land is on-sold to third parties to build residences (e.g. a foreign person purchases vacant land on which they undertake land development, such as preparing a plan of subdivision for a housing development) which they on-sell to a builder.

Commercial residential premises

Commercial residential premises has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act) and includes:

  • Hotel, motel, inn, hostel or boarding house.
  • Premises used to provide accommodation in connection with a school.
  • Caravan park or camping ground.
  • Anything similar to residential premises described above.

More about commercial residential premises

Residential care facilities, supported residential services and retirement villages

Dual-purpose property(s)

A property can be used for both residential and commercial purposes. If it is primarily used for residential purposes, then it is a residential property and the additional duty is applied to the foreign purchaser’s share of the dutiable value of the whole property, including the part that is not used for residential purposes.

Change of intention

If you are a foreign purchaser who acquires property that is not residential property but form the intention to convert the property into residential property, you may have to pay the additional duty. Within 14 days of forming the intention to convert the property, you must advise us in writing of that intention.

The amount of additional duty you need to pay if there has been a change of intention to convert non-residential property into residential property, depends on when the intention was formed. If the foreign purchaser forms the intention:

  • Before 1 July 2015, there was no additional duty.
  • On or after 1 July 2015 but before 1 July 2016, the applicable rate of additional duty is 3%.
  • On or after 1 July 2016, the applicable rate of additional duty is 7%.
  • On or after 1 July 2019, the applicable rate of additional duty is 8%.

Eligible corporate reconstruction concession and corporate consolidation concession transactions

Corporate groups may rearrange their affairs by undertaking a corporate reconstruction or corporate consolidation. The corporate reconstruction concession and the corporate consolidation concession apply to eligible transactions arising out of agreements and arrangements entered into on or after 1 July 2019.

If foreign purchaser additional duty applies to an eligible transaction, the corporate reconstruction concession or the corporate consolidation concession is applied on the foreign purchaser additional duty inclusive amount, otherwise payable.

Controlling interest in a corporation

A foreign natural person, foreign corporation or the trustee of a foreign trust has a controlling interest in a corporation when that person or entity either alone, or together with an associated person, or another foreign natural person, foreign corporation or the trustee of a foreign trust:

  • Is in a position to control more than 50% of the votes (voting power or potential voting power).
  • Has more than 50% of the issued shares in that corporation.
  • Has (in the Commissioner's opinion) the ability to influence the outcome of the decisions about the corporation’s financial and operating policies, taking into account certain factors (the practical influence a person can exert in addition to any rights the person can enforce, any practice or behaviour affecting the corporation’s financial or operating policies, even if that practice or pattern of behaviour involves the breach of an agreement or breach of trust).

An 'associated person' can be any of the following:

  • A relative of the foreign purchaser.
  • A partner in a partnership.
  • Another corporation with the same majority shareholder as the foreign corporation.
  • A trustee of the trust in which the foreign purchaser is a beneficiary.

Note: The associated person does not have to be a foreign natural person, foreign corporation or the trustee of a foreign trust.

Voting power and potential voting power

The voting power in a corporation refers to the maximum number of votes that might be cast at a general meeting of the corporation.

Potential voting power in a corporation refers to the voting power based on the assumption that the votes might be cast at a general meeting of the corporation including each vote that:

  • might exist in the future because of the exercise of a right (whether actual, prospective or contingent), and
  • if it came into existence, might be cast at a general meeting of the corporation.

Example 3: The transferee corporation is a foreign purchaser

XYZ Pty Ltd purchases land in Victoria. XYZ Pty Ltd is a corporation incorporated in Australia. Its shareholders are A Pty Ltd, with 45%, and B Pty Ltd, with 55%.

Diagram to illustrate example 1

B Pty Ltd has two shareholders, both of whom are foreign natural persons. As a result, B Pty Ltd is a foreign corporation with a controlling interest in XYZ Pty Ltd, which makes XYZ Pty Ltd a foreign corporation.

Example 4: The transferee is a foreign purchaser because there is a foreign natural person, corporation or trust in the transferee’s corporate structure

XYZ Pty Ltd purchases residential property in Victoria. XYZ Pty Ltd is a corporation incorporated in Australia. XYZ Pty Ltd has two shareholders, A Pty Ltd, with 45%, and B Pty Ltd, with 55%. B Pty Ltd has two shareholders, Danny and Elizabeth. Danny holds an Australian permanent visa and has 35% of the shares in B Pty Ltd. Elizabeth is a foreign natural person who has 65% of the shares in B Pty Ltd.

Diagram to illustrate example 2

Elizabeth has an interest in more than 50% of the issued shares in B Pty Ltd and therefore has a controlling interest in B Pty Ltd. This means B Pty Ltd is a foreign corporation. B Pty Ltd holds more than 50% of the issued shares, and therefore has a controlling interest, in XYZ Pty Ltd. This makes XYZ Pty Ltd a foreign corporation also, meaning XYZ Pty Ltd is liable for additional duty on purchases of residential property.

Substantial interests in a trust

A foreign natural person, foreign corporation or the trustee of a foreign trust has a substantial interest in a trust when that person or entity either alone, or together with an associated person, or another foreign natural person, foreign corporation or the trustee of a foreign trust has:

  • a beneficial interest of more than 50% of the capital of the estate of the foreign trust, or
  • in the Commissioner's opinion, the capacity to determine or influence the outcome of the decisions about the administration and conduct of the trust, taking into account certain factors (such as the practical influence the person can exert in addition to any rights the person can enforce, and any practice or behaviour affecting the trustee’s administration and conduct of the trust, even if that practice or pattern of behaviour involves the breach of an agreement or breach of trust).

Discretionary trusts

For discretionary trusts, a person or member of a class of persons is taken to have a beneficial interest in the maximum percentage of the capital of the trust estate that the trustee of the discretionary trust is empowered to distribute to that person. The effect of this is that a discretionary trust that has any potential foreign beneficiaries will generally be a foreign trust for the purposes of the additional duty provisions. 

Family trusts

Family trusts are predominantly discretionary in nature. These trusts will often have a wide class of family members as general beneficiaries, which may include foreign persons who are not intended to benefit from the trust. In interpreting family trust deeds of this nature, the Commissioner initially adopted what was termed the 'practical approach'. If it could be demonstrated that a family trust that had foreign beneficiaries who had not and who are, based on available information, unlikely in the future to receive any distributions, the trust would not be considered a foreign trust. 

As the foreign purchaser rules have now been in place for some time and are more broadly understood, the Commissioner has determined that the practical approach for family trusts will no longer be applied.

Transitional arrangements

We will continue to apply the practical approach for dutiable transactions where the contract of sale was entered into, or nominations were made in respect of a sub-sale, before 1 March 2020.

Read more about foreign purchaser additional duty and discretionary trusts.

Foreign trust examples

Example 5: The transferee trust is a foreign purchaser

ABC Pty Ltd acts as trustee for the ABC Unit Trust which has two unit holders, Joe and Elena. Joe is an Australian citizen who holds 40% of the units in the unit trust. Elena is a foreign natural person who holds 60% of the units in the unit trust.

Elena has a substantial interest in the ABC Unit Trust, which makes it a foreign trust.

Diagram to illustrate example 3

Example 6: The transferee is a foreign purchaser because there is a foreign natural person, corporation or trust in the transferee’s trust structure

ABC Pty Ltd, as trustee of the ABC Unit Trust, buys residential property. The ABC Unit Trust has two unit holders, Steve and Z Pty Ltd. Steve holds an Australian permanent visa and 40% of the units in the unit trust, while Z Pty Ltd is a corporation incorporated in Australia, which holds 60% of the units in the unit trust.

The sole shareholder of Z Pty Ltd is Poli, a foreign natural person. As Poli has an interest in more than 50% of the issued shares in Z Pty Ltd, she has a controlling interest in Z Pty Ltd, making Z Pty Ltd a foreign corporation. Z Pty Ltd holds an interest in more than 50% of the capital of the trust estate of the ABC Unit Trust, Z Pty Ltd has a substantial interest in the unit trust. This makes the ABC Unit Trust a foreign trust, which means ABC Pty Ltd, on behalf of the ABC Unit Trust, liable for the additional duty on purchases of residential property.

Diagram to illustrate example 4

Exemption from additional duty 

Foreign corporations and foreign trusts may, in some circumstances, be eligible for an exemption from additional duty. The Treasurer has gazetted guidelines outlining the general principles and circumstances which will be considered in deciding whether an exemption should be granted. 

The exemption is intended to apply to corporations or trusts that are Australian based and whose activities in developing or re-developing property adds to the supply of housing stock in Victoria. The effect of an exemption is that the foreign corporation or foreign trust, in which the person has a controlling or substantial interest, will not have to pay the additional duty.

The Treasurer has delegated the power to determine applications for this exemption to the Commissioner. While this delegation is in force, the Treasurer does not have the power to make exemption decisions. All applications for exemptions must be directed to the State Revenue Office.

Before you apply for an exemption, you should refer to the relevant Treasurer’s guidelines to determine your eligibility:

  • The guidelines issued on 1 October 2018, include examples of how build-to-rent developments may qualify for the exemption, and apply to any transactions and relevant acquisitions occurring on or after 1 October 2018.
  • The guidelines issued on 5 January 2018, following a scheduled review, apply to any transactions or relevant acquisitions that occurred on or after 5 January 2018 and before 1 October 2018.
  • The guidelines issued on 11 August 2015 apply to any transaction or relevant acquisitions that occurred before 5 January 2018. 

If you want to apply for an exemption, you should submit an application before completing your transaction.

Notification requirements

If you are a foreign purchaser and you enter into a contract, transaction, agreement or arrangement over property in Victoria on or after 1 July 2015, you must provide information that shows you are foreign purchaser when you lodge your Digital Duties Form.

Any underpayment in duty that arises because you fail to accurately identify in a digital duties form that you are a foreign purchaser or that residential property is being acquired attracts penalties and interest under the Taxation Administration Act 1997. It is also an offence to give false or misleading information or deliberately omit information that affects a tax liability.

Charge on residential property

Unpaid duty is a first charge on the residential property if a foreign purchaser fails to pay additional duty by the due date, and the Commissioner has issued an assessment for the additional duty liability on or after 1 July 2016. However, if the charge has not been registered and the property is sold, we will not enforce the charge against the new owner.

Last modified: 24 November 2023

wrapper

Please let us know how this page could be improved. If you'd like a response to your feedback, please contact us online instead.

Back to top