In Victoria, a foreign investor purchases a $750,000 apartment. What additional surcharge stamp duty must they pay?

Q: What is the correct answer to: In Victoria, a foreign investor purchases a $750,000 apartment. What additional surcharge stamp duty must they pay?

The correct answer is $60,000 (8% surcharge). Option B is correct because Victoria's Duties Act 2000 imposes an 8% Additional Buyer Duty surcharge on foreign investors purchasing residential property. This rate has been in effect since 2016 and applies to the full purchase price. For a $750,000 apartment, the calculation is: $750,000 × 8% = $60,000. This surcharge is payable in addition to standard stamp duty and must be paid by foreign persons as defined under the Act, which includes foreign corporations and individuals who are not Australian citizens or permanent residents.

Q: What background knowledge is needed for this Finance Taxation question?

Victoria's Additional Buyer Duty (ABD) was introduced in 2016 under the Duties Act 2000 to address concerns about foreign investment in residential property. The 8% surcharge applies to foreign persons, defined as individuals who are not Australian citizens or permanent residents, and foreign corporations. This is separate from and additional to standard stamp duty calculated on the dutiable value. The policy aims to ensure foreign investors contribute fairly to state revenue while potentially moderating demand pressures on housing markets. Real estate professionals must verify client residency status and factor these costs into purchase advice.

Q: What is a good way to remember the answer to this Finance Taxation question?

Remember 'Foreign investors ATE percent' - the word 'ATE' sounds like 'eight' and reminds you that foreign investors pay an additional 8% surcharge in Victoria. Picture someone eating 8% more of a pie to remember the extra cost. When you see foreign investor surcharge questions for Victoria, immediately think 'ATE percent' to recall the 8% rate. This helps distinguish Victoria's rate from other states that may have different percentages.

Q: What exam tip applies to this Finance Taxation question?

Always identify the state first, then apply the correct surcharge rate. Victoria = 8% for foreign investors. Calculate by multiplying purchase price by 0.08. Remember this is additional to, not instead of, standard stamp duty.

Q: How does this Finance Taxation concept apply in Australian real estate practice?

A Chinese investor contacts your agency about purchasing a $750,000 Melbourne apartment as an investment property. As their agent, you must advise them that beyond the standard stamp duty of approximately $40,000, they'll face an additional $60,000 foreign investor surcharge. This total tax burden of around $100,000 significantly impacts their investment return calculations and may influence their decision to proceed. You'll need to ensure they understand these costs upfront and have sufficient funds available for settlement through PEXA.

Question

Finance TaxationStamp DutyVICMEDIUM

In Victoria, a foreign investor purchases a $750,000 apartment. What additional surcharge stamp duty must they pay?

Answer Options

A

$37,500 (5% surcharge)

B

$60,000 (8% surcharge)

C

$56,250 (7.5% surcharge)

D

$75,000 (10% surcharge)