Foreign Purchaser Additional Duty

Foreign Purchaser Additional Duty (FPAD) is an extra stamp duty surcharge applied to residential property acquisitions by foreign buyers in Victoria. It was introduced in 2015 to cool foreign investment in the residential housing market.

Currently the surcharge is 8% of the dutiable value, plus the normal land transfer duty.

As part of our Property Taxes in Victoria series we provide a detailed overview of the most common property duties and land taxes. Please note that tax laws, thresholds and tax rates are subject to annual revisions, so check the relevant government website for the latest information.

You can use stamp duty calculators here to work out how much duty you have to pay:

For example, a foreign purchaser buying a $1,000,000 home in Victoria would pay the standard duty (for example $55,000) plus  an additional $80,000 in FPAD. In total they would pay $135,000 in duties.

FPAD applies to purchases of residential property – broadly, land that is, or could be, used for residential purposes. This captures property intended to be developed into residential use.

FPAD applies to purchases of residential property (houses, apartments, residential land) but not to exclusively commercial or industrial property in Victoria.

When does the foreign purchaser additional duty apply?

FPAD is triggered whenever a foreign purchaser acquires an interest in Victorian residential property.

"Foreign purchaser" includes three categories:

1. a foreign natural person (an individual who is not an Australian citizen or permanent resident, or not a New Zealand citizen on a special category visa);
2. a foreign corporation (incorporated overseas, or incorporated in Australia but controlled by foreign persons); or
3. a trustee of a foreign trust.

Note, discretionary family trusts can be deemed "foreign" if any potential beneficiary is foreign (see below).

FPAD also applies to other landholder acquisitions – e.g. if a foreign person acquires a certain amount of shares in a company that owns residential land, the surcharge will apply in the landholder duty calculation.

Common risks:

The biggest trap for buyers is unintentional foreign status – particularly with trusts and company shares. Many people use family trusts to buy property.

Since March 2020, the State Revenue Office deems any discretionary trust to be foreign unless the trust deed explicitly excludes foreign beneficiaries.

This means if your family trust (even if all current family members are Australian) has standard wording allowing distributions to, say, "relatives anywhere in the world" or unnamed potential beneficiaries, the SRO treats the trust as foreign. The result: an extra 8% duty surprise.

To avoid this, trusts need a "foreign beneficiary exclusion" clause added before purchasing property.

Another risk is simply not realising you're a "foreign person" for these purposes – for example, Australian temporary residents or expats who are non-resident for tax could still count as foreign for FPAD unless they have permanent residency or citizenship.

Where foreigners buy with Australian partners: if one purchaser is foreign, FPAD applies pro rata to their share. E.g. a 50/50 purchase where one is foreign will incur 8% on 50% of the value.

Exemptions for Developers

Developers who are adding to housing supply may be eligible for an exemption. The exemption is not automatic – you must apply to the Treasurer for an exemption, and strict criteria apply. Failing to do so means paying the surcharge.

Conveyancer vs. lawyer:

Conveyancers are not qualified or insured to provide advice beyond a Contract of Sale and standard conveyancing processes. Legal documents, drafting special conditions, amending trusts and providing advice concerning duties must be done by a lawyer. This is a nuanced area – even timing matters so for complex matters ensure you obtain the right advice.

Objecting to an Assessment:

You can object to the assessment. Objections are lodged with the SRO (again within 60 days of assessment). If you are unsuccessful at resolving this with the SRO's, VCAT or court is the next step if not satisfied.

Because FPAD is relatively new, it's wise to have lawyers who are experienced in state tax to run the challenge.

If you need assistance with state or federal tax advice contact one of our property lawyers or tax laywers for guidance on your matter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.