Watch Out: NSW Surcharge Land Tax Traps You Might Not Expect
- 凯mi
- Oct 10
- 4 min read
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Thinking you’re safe from extra land tax because you spend time overseas — or hold property through a trust with some exclusion clause? Recent tribunal decisions are showing how easily things can go wrong. Here’s what you need to know.
What is surcharge land tax (and why should you care）？
In NSW, if you own residential property and are considered a “foreign person” (or an absentee), you can be hit with surcharge land tax on top of standard land tax.
The rules are strict: even if you have been in Australia for part of the time, if you don’t meet the definition of ordinary residence, you may lose the exemption.
The surcharge rate in NSW is 5% (from 2025 onward) on the unimproved land value of your residential land.
So yes — this is not just for mega properties or international tycoons. If you or your trust hold NSW residential land, this could matter to you.
Recent Case: Chen--When "good reasons" to be away don't help
In Chen v Chief Commissioner of State Revenue (2024 decision, NSW CATAD) the Tribunal confirmed that a foreign person surcharge applied, even though the taxpayer had reasons (personal, family, etc.) for being absent. The legal test is not sympathy — it’s strict compliance with the rules.
Here’s what happened:
The taxpayer did not satisfy the required days in Australia threshold in the 12 months before 31 December (the key reference date) to maintain “ordinary residence.”
The taxpayer also tried to rely on exemptions (including principal place of residence exemptions) and arguments of fairness, but these were rejected: statutory tests prevailed over sympathetic reasons.
The takeaway? Having personal hardship or “reasonable reasons” for absences doesn’t guarantee an exemption — the legal tests are rigid.
Trusts & Drafting Risk: The Grima Warning
Even if you personally meet the rules, trusts holding NSW residential land bring their own traps — especially around how the trust deed is drafted. The recent Grima decision (NSWCATAD 149) is a red flag.
Here’s the simplified version of the risk:
In NSW, all family trusts are treated as “foreign” unless their trust deed irrevocably excludes foreign persons from benefiting (i.e. they can never receive income or capital).
The Grima trust had an exclusion clause — but the way it was drafted included a temporal condition (i.e. the exclusion only applied while the trust held the property). That meant the clause might “wear off” when the property was sold.
The Tribunal held that this “temporal limit” was effectively a hidden amendment mechanism (“selfexecuting change”) and failed the strict “no amendment” test. As a result, the exclusion clause was invalid on the relevant 31 December date — and surcharge land tax applied.
Many existing trust deeds have this kind of temporal clause embedded, putting them at risk for both:
surcharge stamp duty on residential property purchases
surcharge land tax on existing NSW residential land holdings
Basically: a trust deed that looks safe may not be safe under scrutiny — drafting detail matters.
📊Surcharge Land Tax & Stamp Duty Across States -- A Comparison
Below is a simplified table showing how surcharge regimes differ across Australian states. Use it as a “quick map,” but always check with us (or a specialist) for your situation.
State / Territory | Surcharge Stamp Duty (residential) | Surcharge Land Tax / Ongoing |
New South Wales (NSW) | Additional 9 % surcharge (from 1 Jan 2025) for foreign purchasers | Additional 5% applies to all residential land owned by foreign persons. |
Victoria | Additional 8% surcharge applies to foreign purchasers (including listed landholder acquisitions) | Absentee Owner (Surcharge) - An additional 4% applies to all land owned by absentee owners |
Queensland | Additional 8% surcharge applies to foreign purchasers (concessional 0.8% for listed landholder acquisitions) | Additional 3% applies to all taxable land owned by absentee individuals, foreign corporations and trustees of foreign trusts |
Western Australia | Additional 7% surcharge applies to foreign purchasers (including listed landholder acquisitions) | Additional 0.14% to land tax for property located in the metropolitan area |
South Australia / Others | Additional 7% surcharge applies to foreign purchasers (including listed landholder acquisitions) | Max rate of 2.4% surcharge on land owned in trusts where the interests of trust beneficiaries are not disclosed or cannot be identified (excluding listed or widely held trusts) |
(This is indicative. The surcharge rules, rates and conditions change. Always confirm before planning.)
What Should You Do Now (If You Own or Plan to Own NSW Residential Land)?
Here’s a simple action list we suggest:
Review your personal presence history — map out days in/out of Australia in each 12month period — especially before 31 December each year.
Review your trust deed(s) — check whether foreign person exclusion clauses are really irrevocable, unconditional, and free of time limits or triggers.
Fix before it’s too late — if your deed is flawed, amend (if legal) before the next 31 Dec or before entering a contract to buy property.
Document everything — travel logs, passports, leases, occupancy evidence. You may need it if the tax authority asks.
Seek advice early — surcharge law is technical and evolving. Early advice can avoid big surprises.
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