Foreign Ownership Surcharge and The ‘Ten Pound Pom’ Dilemma
Tuckfields recently had a delayed settlement whereby a purchaser did not realise they were considered a “Foreigner” under the Foreign Ownership Surcharge. This Surcharge came into effect on 01/01/2018.
In simplified terms, any ‘foreign person’ purchasing Residential Property is required to pay a 7% surcharge on the purchase price of that property. eg a property purchased for $100,000 will attract a $7000 surcharge, over and above the Stamp Duty payable.
It is the responsibility of the purchaser’s conveyancer to collect the surcharge on behalf of Revenue SA at the time of settlement, unless the purchaser can prove the following:
- Australian Born
- Hold an Australian Passport
- An Australian Citizen
- Holder of a Permanent Resident Visa with the meaning of Section 30 (1) of the Migration Act
- A New Zealand Citizen who is the holder of a special category Visa within the meaning of Sect 32 (1) of the Migration Act
Unless a Purchaser can provide the documents stated above and provide the originals to their conveyancer, the surcharge will be collected from the Purchaser and paid at settlement.
The purchaser in question migrated to Australia from the UK with their Parents in the 1960s under the scheme commonly referred to as “Ten Pound Poms“. They were a child at the time, never travelled overseas since arrival and never thought they would have to apply for Residency/Citizenship. Never did it occur to them that they were classed as a “Foreigner” for the purposes of buying a residential property in Australia. Prior to 01/01/2018 they had purchased and sold property without the requirement to prove their status for living in Australia.
The settlement was delayed while the purchaser contacted Home Affairs to obtain the written confirmation required to prove their Permanent Residency Status.
The process took several weeks resulting in the purchaser being in default under the terms of their Contract. Luckily, the vendors were understanding of the situation. They allowed the purchaser extra time to obtain the required documentation without charging penalties, or cancelling the Contract and retaining what was a significant deposit, especially as they had signed an “unconditional” Contract.
Check your Citizenship before buying property!
The moral to the story is, if you are not Australian born and have not obtained Australian Citizenship and you wish to purchase property in Australia, it would be prudent to check that you have the necessary documentation to show that you hold a Permanent Residency Visa before entering into a contract.
If you have applied, but not yet received a written confirmation, you are obliged to pay the 7% surcharge at settlement, however; you can apply for a refund providing you receive your Permanent Residency Visa within twelve months of settlement taking place.
If you wish to check you hold a Permanent Residents Visa the following websites may be of assistance: