Foreign natural person/corporation

All section numbers are references to the Duties Act 2000. In some instances, the definitions here have been re-worded to assist you in completing this form.

Foreign purchaser (section 3(1))

A foreign purchaser is any one of the following:

  • a foreign natural person,
  • a foreign corporation, or
  • a trustee of a foreign trust.

Foreign natural person (section 3(1))

You are a foreign natural person if you are not:

  • an Australian citizen,
  • an Australian Permanent Resident, or
  • a New Zealand citizen with a Special Category Visa (Subclass 444).

Foreign corporation (section 3(1))

A foreign corporation is:

  • a corporation incorporated outside Australia, or
  • a corporation where one of the following persons has a controlling interest in the corporation, whether on their own or with an associated person or persons:
    • a foreign natural person,
    • another foreign corporation, or
    • a trustee of a foreign trust.

Controlling interest (section 3A)

A person has a controlling interest in a corporation where that person:

  • is in a position to control, whether directly or indirectly, more than 50% of the voting power or potential voting power in the corporation,
  • has an interest in more than 50% of the issued shares in the corporation, or
  • the Commissioner has determined that the person has the capacity to determine or influence, directly or indirectly, the outcome of decisions about the corporation’s financial and operating policies.

Example — the transferee corporation is a foreign purchaser

XYZ Pty Ltd purchases land in Victoria. XYZ Pty Ltd is a corporation incorporated in Australia. Its shareholders are A Pty Ltd with 45% and B Pty Ltd with 55%. B Pty Ltd has two shareholders, both of whom are foreign natural persons. As a result, B Pty Ltd is a foreign corporation who has a controlling interest in XYZ Pty Ltd which makes XYZ Pty Ltd a foreign corporation. Therefore XYZ Pty Ltd will be liable for the additional duty payable by foreign purchasers of residential property.

Example — The transferee is a foreign purchaser because there is a foreign natural person corporation or trust in the transferee’s corporate structure

XYZ Pty Ltd purchases residential property in Victoria. XYZ Pty Ltd is a corporation incorporated in Australia. XYZ Pty Ltd has two shareholders, A Pty Ltd with 45% and B Pty Ltd with 55%. B Pty Ltd has two shareholders (D and E). D is the holder of an Australian permanent visa who has 35% of the shares in B Pty Ltd, while E is a foreign natural person who holds 65% of the shares in B Pty Ltd.

E has an interest in more than 50% of the issued shares in B Pty Ltd and so has a controlling interest in B Pty Ltd. B Pty Ltd holds more than 50% of the issued shares and therefore a controlling interest in XYZ Pty Ltd. This makes XYZ Pty Ltd a foreign corporation which means that XYZ Pty Ltd will be liable for the additional duty payable by foreign purchasers of residential property.

Voting power and potential voting power (section 3(1))

Voting power in a corporation is a reference to the maximum number of votes that might be cast at a general meeting of the corporation. Potential voting power in a corporation is a reference to the voting power based on the assumption that the votes might be cast at a general meeting of the corporation including each vote that:

  • might exist in the future because of the exercise of a right (whether actual, prospective or contingent), and
  • if it came into existence, might be cast at a general meeting of the corporation.

Both these definitions have the same meaning as in the Foreign Acquisitions and Takeovers Act 1975 (Cth).

Foreign trust (section 3(1))

A foreign trust arises where:

  • a foreign natural person,
  • a foreign corporation, or
  • another person that holds the substantial interest as trustee of another foreign trust has a substantial interest, whether on their own or with an associated person or persons, in the trust.

Substantial interest (section 3B)

A person has a substantial interest in the trust estate of a foreign trust if:

  • the person has a beneficial interest of more than 50% of the capital of the trust estate, or
  • the Commissioner has determined that the person has the capacity to determine or influence the outcome of decisions about the administration and conduct of the trust.

In the case of a discretionary trust in which the trustee has power or discretion as to the distribution of the capital of the trust estate to a member or class of person, any such person is taken to have a beneficial interest in the maximum percentage of the capital of the foreign trust estate that the trustee is empowered to distribute to that person.

Example - the transferee trust is a foreign purchaser

ABC Pty Ltd acts as trustee for the ABC Unit Trust which holds two unitholders (Y and Z). Y is an Australian citizen who has 40% of the units in the Unit Trust, while Z is a foreign natural person who holds 60% of the units in the Unit Trust. Z has a substantial interest in the ABC Unit Trust, which makes it a foreign trust.

Example - The transferee is a foreign purchaser because there is a foreign natural person, corporation or trust in the transferee’s trust structure

ABC Pty Ltd as trustee of the ABC Unit Trust buys residential property on its behalf. The ABC Unit Trust has two unitholders (Y and Z Pty Ltd). Y is the holder of an Australian permanent visa who holds 40% of the units in the Unit Trust, while Z Pty Ltd is a corporation incorporated in Australia that holds 60% of the units in the Unit Trust. The sole shareholder of Z Pty Ltd is X, a foreign natural person.

X holds an interest in more than 50% of the issued shares in Z Pty Ltd and so has a controlling interest in Z Pty Ltd. Z Pty Ltd holds an interest in more than 50% of the capital of the trust estate of the ABC Unit Trust and therefore has a substantial interest in the Unit Trust. This makes the ABC Unit Trust a foreign trust, which means ABC Pty Ltd on behalf of the ABC Unit Trust will be liable for the additional duty payable by foreign purchasers of residential property.

Residential property (section 3F)

Residential property is land in Victoria:

  • Capable of being used solely or primarily for residential purposes and that may lawfully be used in that way.

Example - purchasing separately titled residential apartment

A foreign purchaser buys a separately titled residential apartment in a building. The residential apartment is capable of being used solely or primarily for residential purposes and therefore it is residential property.

  • Which includes a building, or part of a building, that a person intends to refurbish or extend so the land is capable of being used solely or primarily for residential purposes and may lawfully be used in that way.

Example - purchasing a disused warehouse with intention to refurbish into residential apartments

A foreign purchaser buys a disused warehouse with the intention of refurbishing the warehouse into residential apartments. Although at the time of purchase, the land is not capable of being used solely or primarily for residential purposes, the purchase of the disused warehouse is residential property because it will be refurbished so that it is capable of being used solely or primarily for residential purposes.

  1. On which a person intends to construct a building so the land is capable of being used solely or primarily for residential purposes and may lawfully be used in that way.

Example - purchasing vacant land to build residential apartments

A foreign purchaser buys vacant land on which they intend to construct residential apartments.

  1. in respect of which a person has undertaken or intends to undertake land development for the purposes of:
    1. constructing a building so the land is capable of being used solely or primarily for residential purposes and may lawfully be used in that way, or

Example - purchasing vacant land to undertake land development

A foreign purchaser buys vacant land on which they intend to undertake land development (e.g. preparing a plan of a subdivision for a housing estate) in order to construct the housing development.

  1. enabling another person to construct a building so the land is capable of being used solely or primarily for residential purposes and may lawfully be used in that way.

Example - purchasing vacant land to undertake land development

A foreign purchaser buys vacant land on which they have undertaken land development (e.g. they have requested a planning authority to prepare an amendment to a planning scheme to allow a housing development) and which they intend to sell to a builder to construct the housing development.

Refurbish means to undertake building work that requires a building permit to be issued under the Building Act 1993 for the conversion of an existing building:

Land development means any one or more of the following:

  • Preparing a plan of subdivision or taking steps to have the plan registered.
  • Applying for or obtaining a permit under the Planning and Environment Act 1987 in relation to the use or development of the land.
  • Requesting a planning authority to prepare an amendment to a planning scheme that would affect the land.
  • Applying for or obtaining a permit or approval under the Building Act 1993.
  • Doing anything in relation to the land for which a permit or approval under the Building Act 1993 would be required.
  • Developing or changing the land in any other way that would lead to the enhancement of its value.

The following are not residential property:

  • commercial residential premises, as defined in the A New Tax System (Goods and Services Tax) Act 1999 (Cth). This includes hotels, motels, inns, hostels, boarding houses, premises used to provide accommodation in connection with a school, caravan parks, camping grounds, and other similar properties. However, the purchase of a separately titled room in a hotel or motel in its own right (without the commercial infrastructure of the hotel or motel) may not constitute commercial residential premises. In such cases the separately titled room will be residential property.
  • A residential care facility, as defined in section 76 of the Land Tax Act 2005.
  • A supported residential service, as defined in the Supported Residential Services (Private Proprietors) Act 2010.
  • Land used for the purposes of a retirement village, as defined in the Retirement Villages Act 1986.