On 21 February 2023, state revenue agency Revenue NSW announced that existing surcharge provisions for residential property in New South Wales were not consistent with international tax treaties. 

Citizens of New Zealand, Finland, South Africa and Germany will no longer have to pay surcharge land tax or surcharge purchaser duty on residential property purchases in New South Wales. Revenue NSW has indicated that refunds may be available for eligible buyers. 

How Surcharge Purchaser Duty and Surcharge Land Tax Works

When foreign buyers acquire residential property in Australia, they are required to pay a surcharge on transfer duty. These transactions include, but are not limited to, agreements for the sale of land, property transfers, and declarations of trust.

The surcharge amount varies between each state and territory, but it can often be more than double the total duty payable.

2023 Changes to Purchaser Duty and Land Tax in NSW

Revenue NSW recently determined that the legislated surcharge purchase duty and surcharge land tax will no longer be imposed on citizens from New Zealand, Finland, South Africa and Germany buying land and property in New South Wales.

Revenue NSW’s rationale was that the surcharges were inconsistent with Australia’s relevant international tax treaties. In particular, the treaties provide that citizens of those countries should not be subject to any tax that is more burdensome that the taxes imposed on an ordinary Australian resident.

Previously, citizens of New Zealand, Finland, South Africa and Germany were subject to an 8% surcharge on transfer duty and a 4% surcharge on annual land tax charges in New South Wales.

The result of the changes is that, effective immediately, citizens from the four countries are no longer required to pay the surcharges. Further, Revenue NSW has announced that eligible foreign homebuyers are entitled to refunds of the surcharges paid on or after 1 July 2021. 

Revenue NSW has indicated that it will be investigating the applicability of these surcharges for non-individual entities such as corporations, trusts or partnerships arising or relating to these jurisdictions. Other countries that have non-discrimination provisions in their tax treaties with Australia (such as Japan) may also have their relationship with the surcharges reviewed.

What the Changes Mean for Foreign Investors 

At this stage, the surcharge changes will only affect real property owned in New South Wales, but it is likely that other jurisdictions will follow suit in the foreseeable future. To date, only Victoria’s State Revenue Office has formally responded by releasing a short statement confirming that it is considering the implications of NSW’s announcement. 

As more information is revealed over the coming months, foreign property purchasers should pay attention to any retroactive applications of non-discrimination policies that could make them eligible for refunds. 

Next Steps

If you’re a citizen of New Zealand, Finland, South Africa, or Germany, you may be eligible for a refund on surcharge purchaser duty paid on or after 1 July 2021. 

Although Revenue NSW has indicated that its representatives will reach out to affected buyers directly via phone or email, talk to your lawyer about more proactive options. Contacting the agency yourself may lead to faster claim identification and resolution time – to date, Revenue NSW hasn’t given any indications as to timelines or expected refund dates. Active outreach also means that your eligible transactions won’t accidentally be overlooked.

Some non-individual entities may, under certain circumstances, be eligible for refunds. If you run an Australian corporation, trust or partnership that is substantially owned by a New Zealand, Finnish, South African, or German citizen, check with your solicitor to see if surcharges were applied to any transaction on or after 1 July.

For personalised advice about your refund eligibility, get in touch with our property law team. Bell Legal Group has helped foreign buyers invest in Australian markets since 1955 – book a consultation to find out how we can support you.

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