Property Purchase by Foreign Residents

For a foreign resident, the first step in buying property is usually not inspecting properties or negotiating price, but confirming whether the buyer will be treated as a foreign person in the legal sense.

Under the NSW revenue rules, whether someone is a foreign person is not determined by nationality alone. Individuals, companies, trusts and even government bodies may, in particular circumstances, be treated as foreign persons. For an individual buyer, an Australian citizen is generally not a foreign person; for a permanent resident, the further question is whether they meet the requirement of being ordinarily resident in Australia. A permanent resident who has not actually been present in Australia for at least 200 days in the 12 months before the contract date may still be treated as a foreign person.

Temporary visa holders usually need to take particular care. Even if you have worked, studied or lived in Australia for many years, while your status remains within a temporary visa category you may need to be assessed under the foreign person rules.

Where there is a joint purchase, a purchase by spouses, a purchase by a company or a purchase by a trust, the assessment becomes more complex. With company and trust structures in particular, it is generally not enough to look at whose name is on the title; control, beneficiary arrangements and the status of the relevant persons must also be analysed.

When a foreign person buys residential property in Australia, foreign investment approval at the federal level usually needs to be considered first. The purpose of the approval regime is to regulate the purchase of Australian residential land by foreign persons, and in particular to distinguish between different types of property such as new dwellings, off-the-plan dwellings, vacant land and established dwellings.

At present, the purchase of established (second-hand) dwellings by foreign persons is very tightly restricted. According to the official Australian foreign investment guidance, from 1 April 2025 to 31 March 2027 foreign investors are generally prohibited from buying established dwellings, except where a limited exception applies. The Government has also signalled an intention to extend this temporary restriction, so you should rely on the rules current at the time of any actual transaction.

This means a foreign purchaser cannot simply choose a property the way an ordinary local buyer would. Before the transaction, you need to confirm the type of property you intend to buy, the buyer’s status, and whether approval is required.

If an approval issue is only discovered after contracts have been exchanged, it can affect the transaction timeline, finance arrangements and settlement risk.

Whether a foreign purchaser can buy a particular type of property usually depends on the type of property and the applicable approval rules.

In general, the regulatory logic for a foreign purchaser buying a new dwelling, an off-the-plan dwelling or vacant land is not the same as for buying an established dwelling. New and off-the-plan dwellings are usually more consistent with the foreign investment policy of encouraging additional housing supply; vacant land transactions generally involve future construction, development timeframes and compliance requirements.

Established dwellings are subject to tighter restrictions. In particular, in the current policy environment a foreign person generally cannot buy an ordinary second-hand dwelling directly, unless a specific exception applies and the relevant approval is obtained.

Before inspecting properties, a foreign purchaser should therefore confirm:

When buying property in NSW, a buyer generally has to pay transfer duty, commonly known as stamp duty. This is a tax payable to the state government; it is not part of the purchase price paid to the seller, nor is it a legal fee or agent’s commission.

Transfer duty is usually calculated by reference to the value of the property. Whether or not the buyer is a foreign person, this cost generally needs to be considered first for any NSW property purchase.

For a foreign purchaser, transfer duty is only part of the cost of the transaction. In addition to transfer duty, the foreign purchaser surcharge duty and, later, surcharge land tax may also apply.

Surcharge purchaser duty is an additional duty that NSW imposes on foreign purchasers buying residential-related property. It is not a substitute for ordinary stamp duty; it is payable in addition to transfer duty.

The risk with this surcharge is that it is usually not a cost reflected in the contract price. A buyer who budgets only for ordinary stamp duty and a deposit may seriously underestimate the funds needed to complete the transaction.

Where there are co-purchasers, a purchase by spouses, a permanent resident, a temporary visa holder, or a company or trust structure, whether the surcharge duty is triggered often requires a specific assessment.

Unimproved land value refers to the value of the land itself, excluding buildings or other improvements. For foreign owners holding an investment property or holding property for the long term, this cost directly affects holding costs and investment returns.

In some circumstances an exemption or special rule may apply to a principal place of residence or a particular status, but whether it applies needs to be assessed specifically by reference to status, living arrangements and how the property is used.

Some clients consider holding property through a company, a family trust or another structure. Such arrangements may be motivated by asset management, family planning, tax planning or investment objectives, but under the foreign purchaser rules they are not automatically more advantageous.

Revenue NSW makes clear that individuals, companies and trusts can all be foreign persons. Whether a company or trust triggers the foreign purchaser surcharge usually requires analysis of control, the range of beneficiaries, the terms of the trust and the status of the relevant persons.

For a company, if a foreign person holds a substantial interest in the company, or several foreign-related persons together hold a certain interest, the company may be treated as a foreign person. For a trust, if the trust terms allow a foreign person to be a beneficiary, or the beneficiary arrangements are not appropriately limited, the trust may be treated as a foreign trust.

Buying through a company or trust therefore cannot simply be assumed to reduce foreign purchaser risk. On the contrary, if the structure is not reviewed in advance, it can give rise to more complex tax and compliance consequences.

The foreign purchaser rules need to be handled with particular care in joint purchases.

If one party is an Australian citizen or an eligible local resident and the other is a foreign person, whether surcharge purchaser duty applies usually has to be assessed by reference to how the property is used, the ownership shares, the nature of the relationship, and whether any specific exemption applies.

This kind of question cannot be resolved simply on the basis of “who contributed more” or “whose name is on the title”. Ownership shares, buyer status, the actual living arrangements and the lodged documents can all affect the final tax outcome.

Where the combination of buyer statuses is more complex, it is best to confirm the ownership structure and tax consequences before signing the contract, and only then decide how the title should be registered.

Finance arrangements for clients with a foreign background are usually more complex than for an ordinary local buyer. Banks may carry out additional checks on visa status, source of income, evidence of overseas income, source of funds, the remittance path and compliance documents.

For buyers relying on overseas income or overseas funds, bank approval can take longer and the documentary requirements can be more demanding. If the finance arrangements are not aligned with the contract timeline, this can affect contract exchange, the cooling-off period, or final settlement.

When budgeting, foreign purchasers should also take into account:

Inadequate funding for a transaction tends to expose risk all at once just before settlement.

If the funds for the purchase come from overseas, the buyer also needs to prepare evidence of the source of funds and the remittance arrangements. Banks, lenders or other parties to the transaction may require the buyer to provide identity documents, an explanation of the source of funds, bank statements, evidence of income or other compliance material.

Bringing overseas funds into Australia can be affected by remittance times, bank checks and documentary requirements. For transactions with a tight settlement date, a delay in funds can directly affect whether the buyer is able to settle on time.

Foreign purchasers therefore usually need to plan their funding path earlier than an ordinary buyer, so that cross-border remittances and bank checks are not left until after contracts have already been exchanged.

For a foreign purchaser, contract exchange and settlement need to take into account both ordinary transaction risk and the additional compliance requirements.

If foreign investment approval has not yet been obtained, finance is still uncertain, tax status has not been confirmed, or overseas funds are not yet in place, entering into a binding contract too early can carry clear risk.

On transaction timing, foreign purchasers usually need to pay particular attention to:

The key to these transactions is not simply completing the ordinary conveyancing steps, but ensuring that status, approval, tax and funding all come together to support the transaction through to completion.

NS Legal can help clients with a foreign background with the legal aspects of buying property, including: