The AAoA has been engaging with the NSW Government throughout the course of this year on changes to surcharge land tax and purchaser duty for serviced apartments.
Foreign persons who own residential land in NSW are subject to a land tax surcharge of 0.75% (stepping up to 2% in 2018) on the taxable value of the residential land which is owned, in addition to any land tax otherwise payable.
Similarly, foreign persons are required to pay a surcharge purchaser duty of 8%, in addition to the duty otherwise payable on the purchase of residential property in NSW.
For some reason, the definition of “residential property” originally included serviced apartments, despite these properties not being residential. Therefore, the additional tax and duty was going to apply to foreign persons who own such properties.
The key argument from the AAoA was that if serviced apartments were to be classified as residential properties, the level of investment in serviced apartments would take a multi-million dollar hit. In turn, this could result in future potential investment in serviced apartments in NSW being redirected to other jurisdictions where the taxation regime is far more attractive to investors. We also pointed out it would significantly dent investor confidence at a time when it is important for the ongoing growth of the accommodation industry in NSW.
Following our advocacy, a fresh taxation ruling has just been released which clarifies that serviced apartments are, indeed, not classed as residential properties, for the purposes of this ruling.
It means the accommodation and tourism industry will benefit from this decision.
In addition to the key government stakeholders we engaged with, we are grateful to one of our Board Directors, Mr Bruce Copland, who undertook a significant amount of work on this issue on behalf of members.
The final ruling can be viewed at the following link: http://www.revenue.nsw.gov.au/info/legislation/rulings/general/g011