The Law Handbook 2024

Chapter 6.2: Buying or selling a house 559 The residential properties that can attract GST are those properties that: • have not previously been sold as residential premises; • have been created by a substantial renovation of a building; or • have been built to replace demolished premises on the same site. If you have an issue with the GST (and this area can be very complex where property is concerned) it is strongly recommended that you obtain professional advice from your accountant. GST withholding regime Since 1 July 2018, if GST applies to the sale of a residential property (usually because it is new or vacant land), the buyer may be required to withhold the GST and pay it to the Australian Taxation Office ( ATO ) at settlement. A vendor’s solicitor or conveyancer must advise a buyer if they are required to withhold GST. A buyer can be penalised for not withholding GST. As it is the buyer’s obligation to remit GST directly to the ATO, if there is any doubt in the buyer’s conveyancer’s mind about whether GST should be withheld at settlement, the conveyancer should apply to the Commissioner for a private ruling. Foreign ownership of property Foreign buyers A foreign buyer can be a natural person, a corpor­ ation, or a corporation acting as a trustee. Foreign Investment Review Board The Australian Government’s Foreign Investment Review Board ( FIRB ) decides whether a foreign buyer is eligible to acquire land in Australia. In general, a foreign buyer of residential property (including vacant land) in Australia must obtain the FIRB’s approval of the purchase before entering into a contract of sale. There is an exception where a foreign buyer is purchasing a home with their Australian spouse as joint tenants. The FIRB’s powers to enforce this requirement are extensive. The buyer may also have to pay damages to the vendor for breach of contract if a sale is found to be void because the buyer failed to obtain the FIRB’s approval. For more information about the FIRB, see www. firb.gov.au. Register of Foreign Ownership of Australian Assets From 1 July 2023, foreign buyers must also register their ownership of certain Australian assets (including land) to the ATO via its online platformwithin 30 days of the acquisition. This includes ongoing obligations when the residential property is disposed of in the future, notwithstanding the value of the interest. Additional land transfer duty If a buyer of property in Victoria is not one of the following: • an Australian citizen; • the holder of a permanent visa; or • a New Zealand citizen holding a special category visa (sub-class 444) who is in Australia at the time of settlement, then the SRO adds eight per cent of the purchase price of the property onto the duty payable. This rate applies to contracts entered into on or after 1 July 2019. If you are a foreign buyer, you may be entitled to an exemption from paying an additional duty if you purchase a principal place of residence jointly with your spouse or domestic partner who is an Australian citizen or permanent resident or a New Zealand citizen who holds a special category visa. Absentee owner land tax surcharge An additional 2 per cent land tax surcharge applies to all land owned by an ‘absentee owner’, an owner who is not an Australian citizen and does not reside in Australia. This will increase to 4 per cent in the 2024 land tax year. This is in addition to the standard land tax.