Under the Duties Act, landholder duty is imposed on certain acquisitions of an interest in a corporation or unit trust that holds land in Western Australia valued at $2 million or more.
Additional duty of 7% applies when a foreign person, or someone related to a foreign person, acquires an interest in a landholder that holds residential property. The additional duty is based on the value of residential property and associated chattels held by the landholder and the extent of the interest acquired by the foreign person or a foreign related person.
Each person acquiring an interest in a landholder in Western Australia must complete a foreign landholder duty declaration.
See the attached fact sheet for examples and more detailed explanations of this information.
Residential property
Show moreResidential property is land in WA that is:
- capable of being (or intended to be) used solely or dominantly for residential purposes or
- vacant or substantially vacant land zoned solely for residential purposes.
It includes an estate or interest in land and anything that is fixed to land.
Examples of properties that are capable of being (or intended to be) used solely or dominantly for residential purposes include:
- established homes and apartments
- commercial property that a person intends to convert into a residence
- land on which a person intends to construct a residence
- land which a person intends to develop into residential properties or subdivide to enable another person to construct a home or apartment on the land or
- partially constructed residences which a person intends to complete.
In determining whether an entity is a residential landholder, the following is not residential property:
- land that is intended to be used solely or dominantly as an aged care facility, retirement village or commercial residential premises
- an easement
- a security interest
- a carbon right or carbon covenant
- things fixed to land that are to be permanently removed
- a mining tenement or an estate or interest in a mining tenement
- a pastoral lease or
- a derivative mining right.
Foreign person
Show moreA foreign person can be a foreign individual, a foreign corporation or a foreign trustee.
Individuals who are not Australian citizens are foreign individuals unless they hold a permanent or special category visa, as determined by the Department of Home Affairs.
- A permanent visa is a visa to remain in Australia indefinitely. Holders of permanent visas are commonly referred to as Australian permanent residents.
- A special category visa (Subclass 444) refers to a visa for New Zealand citizens who wish to visit, stay or work in Australia.
A foreign corporation is a corporation:
- that was incorporated outside Australia or
- in which foreign persons have a controlling interest.
Foreign persons are taken to have a controlling interest in a corporation if one or more foreign persons or their associates directly or indirectly control at least 50 per cent of the voting or potential voting power, or hold at least 50 per cent of the issued shares in the corporation.
Voting power in a corporation refers to the number of votes that might be cast at a general meeting of a corporation. Potential voting power in a corporation refers to the voting power based on the assumption that the votes:
- may exist in the future because of an exercise of a right and
- if they came into existence, would be capable of being cast at a general meeting of a corporation.
A foreign trustee is a trustee of a foreign trust. An individual or corporation acting as trustee for a foreign trust is considered a foreign trustee, even if they are not a foreign person in their own capacity.
A foreign trust is:
- a discretionary trust controlled by a foreign person or
- a discretionary trust in which one or more foreign persons that are takers in default, together with their associates, hold at least 50 per cent interest in the discretionary trust or
- a trust (other than a discretionary trust) where one or more foreign persons, together with their associates, hold beneficial interests in at least 50 per cent of the income of the trust.
A person controls a discretionary trust if they are in a position to directly or indirectly influence the vesting of the capital of the trust property or the distribution of income from the trust property. This includes the trustee of a trust.
A person is an associate of another person if they are:
- family members or
- related corporations or
- trustees of trusts sharing any common beneficiary or
- an individual and a corporation where that individual is a majority shareholder, director or secretary of the corporation (or a related corporation) or
- a trustee and a beneficiary of the same trust or
- a corporation and a trustee of a trust where the corporation or its majority shareholder, director or secretary is a beneficiary or
- a corporation and a trustee of a trust where a related corporation is a beneficiary or
- partners in the same partnership.
If a beneficiary of a trust, other than a unit trust scheme or a discretionary trust, is an associate of a person, the trustee is also treated as an associate of that person.
Foreign landholder acquisitions
Show moreThe acquisition of an interest in a residential landholder is chargeable with foreign landholder duty if it is a foreign landholder acquisition.
An acquisition is a foreign landholder acquisition if the acquirer is a foreign person or if a foreign related person holds an interest in the residential landholder after the acquisition, and:
- the acquirer does not have a significant interest before the acquisition, but has a significant interest after the acquisition or
- the acquirer has a significant interest before the acquisition and their interest increases after the acquisition or
- the combined interest of the acquirer and any related persons is not a significant interest before the acquisition, but is a significant interest after the acquisition or
- the combined interest of the acquirer and any related persons is a significant interest before the acquisition and their combined interest increases after the acquisition.
Calculating foreign landholder duty
Show moreThe value of a residential landholder is determined by combining:
- the value of the landholder’s residential property and the associated chattels and
- the value of any linked entity’s residential property and the associated chattels to the extent of the landholder’s interest in that entity.
Foreign landholder duty is calculated by:
- applying a rate of seven per cent to the value of the residential landholder to the extent of the interest acquired by the foreign person or a related person who is foreign and
- reducing this amount by seven per cent of the value of the residential landholder to the extent of any excluded interest held by the foreign person or a related person who is foreign, immediately before the acquisition occurred.
This is represented by the following calculation:
(7% x value of the residential landholder x interest of foreign person and foreign related persons) less
(7% x value of the residential landholder x excluded interest of foreign person and foreign related persons).
An excluded interest is the total of:
- an interest held more than three years before the foreign landholder acquisition
- an acquired interest on which foreign landholder duty applied
- an interest acquired before the residential landholder (or any linked entity) had an entitlement to residential property in WA and
- an interest held immediately before 1 January 2019.
An excluded interest does not include the interest acquired by the relevant acquisition.
Exempt acquisitions
Show moreA foreign landholder acquisition may be fully or partly exempt from foreign landholder duty if:
- a direct transfer of the landholder’s residential property to the acquirer would be fully or partly exempt from foreign transfer duty or liable for nominal duty
- the foreign landholder acquisition is between members of a corporate family or
- the acquisition occurs to facilitate a court-approved compromise or arrangement with creditors.
An agreement or acquisition statement must be lodged with the Commissioner even if the foreign landholder acquisition is exempt.
Residential developer exemptions
Show moreAn acquisition will be exempt from foreign landholder duty if:
- the landholder, linked entity or associate intends to construct or refurbish 10 or more dwellings, or complete construction or refurbishment of 10 or more dwellings, and:
- the residential landholder or a linked entity is entitled to land that does not have a building capable of being used as a residence
- the interest the subject of the acquisition has not been disposed of by the acquirer
- the parcel of land is, in the Commissioner’s opinion, suitable for 10 or more dwellings and
- construction or refurbishment commences within five years of the acquisition.
- the landholder intends to subdivide, or complete subdivision, for purpose of construction and:
- the residential landholder or a linked entity is entitled to land that is vacant
- the landholder, linked entity or associate intends to subdivide the land so 10 or more dwellings can be constructed on the land
- the interest the subject of the acquisition has not been disposed of by the acquirer
- the parcel of land is, in the Commissioner’s opinion, suitable for 10 or more dwellings and
- subdivision commences within five years after the acquisition.
A partial exemption may apply if a part of the land meets the criteria for this exemption.
If the above criteria is met, use form FDA44 ‘Foreign Landholder Duty – Developer Exemption’ to apply for a reassessment and refund of duty.
