Foreign Persons Duty and Land Tax Surcharge

Foreign persons acquiring or owning residential property in New South Wales can be subject to additional state taxes beyond the ordinary transfer duty and land tax rules.

The two principal NSW foreign-person property surcharges are:

• surcharge purchaser duty when a foreign person acquires residential-related property; and
• surcharge land tax where a foreign person owns residential land in NSW.

Whether a person, company or trust is classified as foreign can involve detailed rules and should be considered before entering into a property transaction.

Surcharge Purchaser Duty

Surcharge purchaser duty can apply when a foreign person acquires residential-related property in NSW.

For relevant transactions entered into on or after 1 January 2025, the surcharge purchaser duty rate is 9% of the dutiable value of the residential-related property.

This surcharge is payable in addition to ordinary NSW transfer duty.

Learn more about NSW Transfer Duty.

Surcharge Land Tax

Foreign persons who own residential land in NSW may also be liable for surcharge land tax.

From the 2025 land tax year onwards, the surcharge land tax rate is 5% of the land value of the relevant residential land.

Unlike ordinary NSW land tax, there is no tax-free threshold for surcharge land tax.

Surcharge land tax may be payable in addition to ordinary land tax where ordinary land tax also applies.

Learn more about NSW Land Tax.

Who is a Foreign Person?

Different rules apply when determining whether an individual, corporation or trustee is a foreign person for NSW surcharge purposes.

For individuals, Australian citizenship, residency status and physical presence in Australia can be relevant to the assessment. Learn more about the NSW 200-day ordinary residence rule for surcharge purchaser duty.

For corporations and trusts, the identity and interests of shareholders, beneficiaries, unit holders and other relevant persons can affect foreign-person status.

Foreign-person status should therefore be considered carefully rather than determined solely by where a purchaser or property owner ordinarily lives.

Foreign Persons and Discretionary Trusts

Discretionary trusts require particular attention under the NSW foreign surcharge rules.

A trustee of a discretionary trust may be treated as a foreign person where a beneficiary or potential beneficiary is a foreign person, even where there is no intention to make a distribution to that person.

This can be particularly important for family and discretionary trusts because the class of potential beneficiaries under a trust deed may be very broad.

Excluding Foreign Beneficiaries

A discretionary trust may need to satisfy specific requirements concerning foreign beneficiaries to avoid being treated as foreign for NSW surcharge purposes.

Generally, the trust must satisfy requirements that:

• no beneficiary or potential beneficiary is a foreign person; and
• the terms of the trust cannot be amended in a way that would allow a foreign person to become a potential beneficiary.

The exclusion of foreign beneficiaries must be appropriately documented and the relevant provisions must satisfy the statutory requirements.

If a trust deed expressly names a foreign person as a beneficiary, additional requirements can apply and simply inserting a general foreign-person exclusion clause may not be sufficient.

Reviewing and Amending Trust Deeds

Where a discretionary trust owns or proposes to acquire residential property in NSW, the trust deed should be reviewed before assuming that the trustee is not subject to the foreign surcharge rules.

Depending upon the existing deed and the circumstances of the trust, an amendment may be required to appropriately exclude foreign beneficiaries.

Any amendment should be considered carefully because changing a trust deed can have legal, taxation, duty and other consequences.

Legal advice should be considered together with appropriate taxation advice where necessary.

Unit Trusts and Other Trust Structures

Different rules can apply to unit trusts, fixed trusts and other trust structures.

For certain trusts, foreign-person status can depend upon whether foreign persons hold substantial or aggregate substantial interests.

The particular trust structure and ownership interests should therefore be reviewed when determining whether surcharge purchaser duty or surcharge land tax may apply.

Foreign Companies

A corporation can also be classified as a foreign person depending upon matters including the interests held by foreign shareholders or other foreign persons.

Where a company or corporate trustee is acquiring or holding residential property in NSW, its foreign status should be determined before relying upon the ordinary transfer duty or land tax treatment.

Before Buying Residential Property in NSW

Foreign-person status and trust ownership should ideally be considered before a contract to acquire residential property is entered into.

The additional surcharge can represent a substantial cost, and correcting an ownership or trust structure after a transaction has occurred may not produce the same outcome as obtaining advice beforehand.

Learn more about our Property Law services.

Advice About Foreign Person Property Surcharges

Russell Kelly & Associates can advise on legal issues concerning NSW property transactions, foreign-person surcharge provisions and the review or amendment of trust deeds where foreign beneficiary provisions are relevant.

Contact Our Office

This information is general in nature. Foreign-person status and surcharge liability depend upon the particular circumstances. Readers should obtain professional advice before acting or relying on this information.