Surcharge purchaser duty and surcharge land tax refunds for NSW foreign land owners

This Tax Insight relates to the recent news alert issued by Revenue NSW on the 21^st of February 2023. 

Revenue NSW has determined that the NSW foreign surcharge provisions for stamp duty and land tax purposes are inconsistent with international tax treaties entered into by the Federal Government with New Zealand, Finland, Germany, and South Africa.

Effective immediately, refunds for surcharge purchaser duty and surcharge land tax may be available for purchasers/transferees, and landowners, from the nations concerned who paid surcharge purchaser duty or surcharge land tax on or after 1 July 2021.

Why only four countries?

Australia has double tax agreement treaties with approximately 40 OECD countries. 

The nondiscrimination provisions under these 40 treaties only extend to Federal taxes, except for the following four (4) countries' treaties which extend the provisions to states taxes also:

•  New Zealand;
•  Finland;
•  Germany; and
•  South Africa.

How did this issue arise?

Revenue NSW was first alerted to this issue via a surcharge purchase duty objection around July 2022. Revenue NSW responded by issuing refund/s going back only 1 year [in respect of the taxpayer the subject of the objection].

Refunds will not be issued prior to 1 July 2021

Notwithstanding that section 2 of the Recovery of Imposts Act 1963 (NSW) places a twelve-month time limit on the recovery of tax, Revenue NSW has agreed, as an administrative concession, to issue refunds for payments made on or after 1 July 2021. For the avoidance of doubt, it is the view of Revenue NSW that the provisions of the Taxation Administration Act 1996 (NSW) are not applicable in this situation.

Taxpayers will be able to lodge an objection for surcharge purchaser duty or surcharge land tax payments made on or after 1 July 2021.

There is no right of objection to a Revenue NSW decision regarding this matter prior to 1 July 2021.

Unanswered questions

The following issues remain unanswered:

•  Why does the Recovery of Imposts Act 1963 (NSW) take precedence over the Taxation Administration Act 1996 (NSW)? Does this mean affected taxpayers from the four nations have no recourse for a dutiable transaction subject to surcharge purchaser duty, land tax liability, or surcharge payments arising more than 12 months ago (subject to Revenue NSW’s administrative concession)?
•  When or if the other states and territories will follow Revenue NSW in issuing refunds?
•  Does the end result go against the policy intention of introducing Chapter 2A into the Duties Act in NSW to charge surcharge purchaser duty for all foreign persons equally? We now have a seemingly absurd situation of there being two classes of foreign persons, but only one class being liable for surcharges.
•  Whether objections will be accepted and overturn the current position such that taxpayers might be able to proceed from a disallowed objection to a Tribunal or Court, or proceed straight to a Tribunal or Court?
•  Why are there no objection rights? Beyond the short response provided by Revenue NSW, there is no substantive justification for not being able to object against surcharge liabilities.
•  Whether any other countries will amend their double tax agreement treaties to be added to this list and also be eligible for refunds?
•  Will the states and territories collectively put pressure on the Federal Government to cease using similar clauses in future double tax agreements or potentially seek amendments to the existing agreements with the four nations?
•  Will Mutual Agreement Procedure (MAP) provisions of double tax agreements override state legislation such as the Recovery of Imposts Act 1963 (NSW), thereby removing any 12-month limitation?
•  What action (if any) will other states and territories take given the position adopted by Revenue NSW?

Refund applications with Revenue NSW

Your local RSM Australia office can assist with surcharge purchaser duty or surcharge land tax refund applications to Revenue NSW via eDuties for payments made before or after 1 July 2021, and/or with an application for act of grace/ex gratia payment for refunds relating to payments made prior to 1 July 2021.