Surcharge Purchaser Duty – Who? Me?

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Written by Special Counsel Leigh Adams, Accredited Specialist Business Lawyer 

Many purchasers are still getting tied up by these provisions. What are they?

The provisions mean that on top of the usual transfer duty payable by residential property purchasers in New South Wales, a further 8% is payable by those who qualify as “foreign persons”.


Surcharge Land Tax Duty

The definition of “foreign persons” is also relevant to surcharge land tax.

If  a person is a “foreign person” and a land owner (within the meaning of s 3 of the Land Tax Management Act) then surcharge land tax applies and s 5A(4)  of the Land Tax  Act provides that  surcharge land tax at the rate of 2% per annum of the “taxable value” of the residential land owned by that person.


Stamp Duty Ruling

NSW Stamp Duty Ruling G009 explains how the concept of “foreign person” applies to surcharge purchaser duty and surcharge land tax duty.


Foreign Person

Who is not a “foreign person”?

(i)            An Australian citizen;

(ii)           Someone who is “Ordinarily Resident” in Australia and the person’s stay in Australia is not limited as to time. An example of where the person’s stay is not limited as to time is where  the person is:

  1. an Australian “Permanent Resident”; or
  2. a New Zealand citizen with a “Subclass 444 Visa”; or
  3. a holder of a “Partner (Provisional) Visa (subclass 309 or 820)”.

Ordinarily Resident means the person has been in Australia for at least 200 days within the last 12 months before the purchase date. To calculate those days, the person must count the days on which the person enters and leaves Australia.

Australian “Permanent Resident” or New Zealand citizen with a “Subclass 444 Visa” : If a person is not “Ordinarily Resident”, but satisfies 1. or 2. above (that is, they are an Australian “Permanent Resident”; or they are  New Zealand citizen with a “Subclass 444 Visa”), then they will not be a foreign person if:

(a)       they have lived in Australia continuously for at least 200 days within the 12 month period from the purchase date; and

(b)       they have live there as their principal place of residence; and

(c )      they buy as an individual not as a company or trust.

Retirement Visa holder (subclass 405 or 410): If a person holds this Visa then (even though the person may only be a Temporary Visa holder) the person will not be a foreign person, if all of (a) – (c) above apply to them.

Temporary Visa: From the above, one concludes that an Australian Temporary Visa holder whose visa is subject to limitations such as an end date, will always be a “Foreign Person” unless they also hold a “Retirement Visa (subclass 405 or 410)”.


Who else is a Foreign Person?

Companies, trusts and partnerships can be foreign persons.



Amongst other examples, if a corporation has a shareholder:

(i)        who is not ordinarily resident in Australia; or

(ii)       which is a foreign corporation which holds a “Substantial Interest” in that corporation; or

(iii)      which is a foreign government which holds a “Substantial Interest” in that corporation

then the corporation is a “foreign person”.

Interest is defined by reference to the actual or potential voting power in the entity that the person, with associates , is in a position to control.

Substantial Interest means that the person or entity holds, alone or with one or more “associates” (as defined in s 4 and s6 (etc)  of the Foreign Acquisitions and Takeovers Act 1975 (Cth)) an interest of at least 20% in the corporation. For example, if “A” is an associate of “B” and “A” owns 20% of the issued shares in “C “ and “B” owns  9% of the issued shares in “C “ then not only is “A” a holder of a Substantial Interest in “C “, but also “B” is the holder of a Substantial Interest in “C”.

The Ruling goes on to explain the application of “Aggregate Substantial Interests” to companies at paragraphs 19 – 20:


Aggregate Substantial Interests

Two or more associated persons hold an aggregate substantial interest in a corporation if the persons, alone or with one or more associates, hold an aggregate interest of at least 40 per cent in the corporation.



The Ruling also explains at paragraph 5 (d) and 5 (e ),  the application  of the definition of “foreign person” to trusts (including unit and discretionary trusts).

Broadly, if an entity is the trustee of a trust, then the trustee will be taken to be a “foreign person” if  a beneficiary of the trust (i) is an individual who is not “ordinarily resident” in Australia or (ii)  is a foreign corporation which holds a “Substantial Interest” in the trust or (iii) is a foreign government which holds a “Substantial Interest” in the trust.

The concept of Aggregate Substantial Interests also applies to trusts.


Discretionary Trusts

The ruling provides at paragraph 23 that for a discretionary trust, each beneficiary that the trustee has the discretion to distribute income or property to is deemed to have the maximum percentage interest in the income or property of the trust in respect to which the trustee may exercise a discretion to distribute to them.

For the typical discretionary trust, the maximum percentage interest is 100% – which therefore means that if any beneficiary is a foreign person, the trustee of the trust will be deemed to be a foreign person.



The above concepts also apply to certain partnerships.

Where to next?

Call Leigh Adams to check if your proposed purchase could be a problem and see what can be done to avoid in the application of these provisions. Don’t exchange contracts without prior advice!


Leigh Adams

Special Counsel

Owen Hodge Lawyers

July 2021

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