Exemption from surcharges for new home development

Monday 5 March 2018 saw the (early) coming into of effect of provisions relating to the Duties Act and Land Tax Management Act. The Office of State Revenue issued Revenue Ruling G013 some three weeks before its prescribed issued date.

These exemptions from land tax and stamp duty surcharges apply to foreign persons who develop new homes within New South Wales.

Revenue Ruling G013

The surcharge on land tax and stamp duty for residential land acquired by foreign persons has been applicable since 21 June 2016. With the recent provisions, there now exists two possible exemptions.

1. If the foreign person can demonstrate to the Chief Commissioner that they will use the land for the construction and sale of a new home, or subdivision and sale of the land for new home construction. This can be applied to a surcharge liability that has arisen before the exemption has been granted – entitling the developer to a refund.
2. Where an exemption has not been granted, but the land is being used for the purposes of the relevant concession, a refund of surcharge duty may be granted.

To obtain the exemption in the first instance, the developer must be an Australian corporation and must apply directly to the Chief Commissioner. The Chief Commissioner must be of the opinion that the corporation is going to construct and sell new homes that have not used and occupied for any purpose (other than as a display home) before the completion of the sale.

The application for refund is required to be made within 12 months of the home being sold and not later than 10 years from the acquisition of the land.

Chief Commissioner Considerations

For the purposes of considering an exemption or refund, the Chief Commissioner will have regard to the following factors:

• The company's past or present involvement in new home construction or subdivision of land.
• The company's plans for new home construction or subdivision of land as evidenced by its corporate strategy, prospectuses, annual reports and similar.
• Development timetables
• Approval by Foreign Investments Review Board to purchase residential real estate.
• Relevant document approvals (for example development consents).
• Approval of finance to carry out activities associated with home construction.
• Any other material matters. This would include such things as engagement of consultants, reports to any stock exchange with respect to the company's activities, marketing of lots for sale "off the plan" and similar factors.

Developers who are deemed to be foreign persons should immediately check transactions where foreign persons stamp duty or land tax surcharges have been paid to seek a refund and to make application for exemption for future transactions

For further details regarding the new provisions, see the NSW Office of State Revenue here.
Thanks to Collin Biggers & Paisley for sharing this insight.