Typically, overseas persons who purchase property in New South Wales (NSW) are required to pay an 8% stamp duty surcharge and a land tax surcharge. These costs are by no means small. However, in early March 2023, the NSW Government reformed the stamp duty surcharge and land tax surcharge. NSW will implement the international tax treaties that the Federal Government has signed with New Zealand, Finland, Germany, and South Africa (international tax treaties) — good news for overseas property buyers from these countries.
As noted above, under NSW rules, overseas buyers purchasing residential-related property must pay an additional 8% stamp duty surcharge and a 4% land tax surcharge (previously 2%, rising to 4% from 2023).
The entry into force of the international tax treaties means that buyers from New Zealand, Finland, Germany, and South Africa purchasing residential-related property, or holding land in their personal capacity, will no longer be required to pay the additional stamp duty surcharge or land tax surcharge.
Overseas persons from New Zealand, Finland, Germany, or South Africa who paid the stamp duty surcharge or land tax surcharge on or after 1 July 2021 may also be entitled to a refund.
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If you are not from New Zealand, Finland, Germany, or South Africa, you may still be exempt from the stamp duty surcharge provided you meet the relevant conditions, which include:
1. Being an Australian ordinarily resident
The definition of “ordinarily resident” is set out in detail on the NSW Revenue website. Put simply, you must: hold PR, and have resided in Australia for at least 200 days in the 12 months before signing the property contract.
2. Exempt PR
If you are a PR holder but do not meet the ordinarily resident requirement above, you may still be exempt from the surcharge if you meet all of the following conditions:
- You must reside continuously in Australia for at least 200 days within the 12 months after the contract date.
- As a PR holder, you must use the property as your principal place of residence.
- The purchase must be made in your personal capacity, not through a company or trust.
3. Holders of a 309 or 802 visa who meet the Australian residency requirements
4. Holders of a 405 or 410 visa who meet the Australian residency requirements
Overseas buyers who do not fall within any of the above categories must pay the additional surcharge.
About the Land Tax Surcharge
NSW land tax comprises two components: the first is Land Tax, and the second is the Land Tax Surcharge. The two are not the same.
Under the new policy, an individual is liable for land tax where the combined land value of all properties held in their name — other than their principal place of residence — exceeds AUD 969,000.
From 21 June 2016, the NSW Government has provided that, in addition to general land tax, overseas persons who purchase residential property in NSW may also be required to pay a Land Tax Surcharge. Unlike land tax, the Land Tax Surcharge has no tax-free threshold.
In other words, the Land Tax Surcharge is specifically aimed at overseas property buyers.
For many Chinese buyers who have only recently settled in Australia, a common question is: “I have PR — am I still considered an overseas person?”
Note that PR holders who have resided in Australia for fewer than 200 days in the past year, as well as all temporary visa holders — including work visa, student visa, tourist/visitor visa, and bridging visa holders — are classified as overseas persons and must pay the Land Tax Surcharge when purchasing residential property in NSW.
Under the NSW 2022–2023 Budget, the Land Tax Surcharge for overseas persons increased from 2% to 4%, effective from midnight on 31 December 2022. From this year onwards, the Land Tax Surcharge has effectively doubled to 4%. NSW Treasurer Matt Kean stated that the additional revenue would be used for health services and other budget expenditure.
Situations in which the Land Tax Surcharge may be waived
Since 2017, certain types of commercial residential premises have been exempt from the Land Tax Surcharge, including:
- Hotels and motels
- Guest houses and apartment-style accommodation
- Student accommodation
- Aged care and other retirement facilities
- Bed and breakfast establishments
- Caravan parks and residential parks
- Apartments, serviced apartments, cabins, and holiday villas
Final thoughts
A landowner’s nationality, visa category, and length of residence in Australia all affect whether they are liable for the Land Tax Surcharge. Before purchasing property in NSW, we recommend consulting a qualified legal professional for more detailed advice on the relevant laws and obligations, to help avoid unnecessary financial losses.
We have written a series of articles on Australian property tax and property law to answer common questions. Further reading:
Even PR holders may have to pay this surcharge — make sure you know before you buy!
Legal issues to be aware of before buying property in NSW
Buying a home with as little as a 2% deposit? Who qualifies? Watch out for these!
Caveats — an effective tool for protecting property interests
Lawyer or conveyancer — who should you use when buying property in Australia?
