Vents MagaZine Music and Entertainment Magazine
Related Articles
The Australian federal government announced in its Mid-Year Economic and Fiscal Outlook 2023–2024 that it will “explain the ambiguity surrounding the interplay between foreign investment fees, and comparable state and territory property taxes, and double tax agreements implemented domestically by the International Tax Agreements Act 1953, to guarantee that the foreign investment fees and similar imposts prevail.” This action will have consequences in the past.
This is in addition to the announcement that
Doubling vacancy costs for foreign investors who have bought residential properties
Tripling foreign investment fees for foreign investors who seek to buy existing homes
Supplying AUD 3.5 million to strengthen the compliance framework of the Australian Taxation Office (ATO) in order to guarantee that overseas investors honour fee, notification, and other regulatory obligations.
Background: All states and territories (except from the Northern Territory) have since adopted foreign surcharges in one form or another after Victoria imposed them for the first time in 2015 in connection to stamp duty and land tax.
Separately, starting in 2021, the federal government will significantly raise the application costs for foreign investment applications pertaining to residential residences. Prior to that, vacancy fees were levied in connection with such applications. These costs seem to be rising at this point.
Revenue NSW announced on May 29, 2023, that it had been inadvertently charging surcharge purchaser duty and surcharge land tax to citizens of India, Japan, Norway, and Switzerland who had acquired and/or held residential real property in New South Wales because of the operation of their respective double tax treaties.
This announcement followed an earlier one on February 21, 2023, regarding Finland, Germany, New Zealand, and South Africa. Regarding the possible illegality of their respective land tax and foreign surcharge duty measures, the other state and territory revenue agencies have not formally conceded anything and have proceeded to enforce their corresponding regulations as legislated.
The federal government’s revelation seems to be the first time it has openly admitted that these double tax treaties might render such taxes—as well , its own levies and taxes—illegal. The declaration does not specify the precise procedures that will be followed to carry out the goal of the federal government.
It is challenging to see how this solution might be implemented without consent from the treaty partner state, given that the core problem seems to be rooted in double tax treaties (which both respective governments have consented to and approved). Deloitte Australia also anticipates challenges if modifications are implemented retroactively, especially in New South Wales, where impacted taxpayers have been receiving refunds (within certain bounds).
This development may be coincidental given the recent ruling in the Vanderstock case (Vanderstock v. Victoria [2023] HCA 30), where the High Court ruled by a 4:3 majority that the State of Victoria’s road user fees were unconstitutional because the applicable legislation imposes an excise duty as defined by section 90 of the Commonwealth Constitution.
For whatever reason, there is now some controversy about the legality of certain state and territory taxes, and it seems that the federal government is now willing to clear up at least part of that confusion.
If you have any specific question around international tax, please ask the International tax specialists at Bates Cosgrave in Sydney.
