NSW land tax surcharge for foreign owners: the 5% rate, who pays and how to claim an exemption

The rate and how it is calculated

Surcharge land tax is charged on the unimproved value of residential land you own at midnight on 31 December each year. Unimproved value is the value of the land alone, without buildings. The rates by land tax year (1 January to 31 December) are:

It is charged separately for each parcel in proportion to your ownership share. Revenue NSW says there are no joint assessments and no secondary deductions for the surcharge. Commercial land is not included, and where one building has both residential and commercial uses, an apportionment factor splits the land value.

Worked example. A foreign individual owns a residential property with a land value of $900,000. Ordinary land tax is nil, because the land value is below the general threshold of $1,075,000 (frozen for land tax years after 2024). Surcharge land tax is 5% x $900,000 = $45,000.

Joint ownership. If that same $900,000 property is owned 50/50 with a partner who is not foreign, the surcharge applies only to the foreign owner's half: 5% x $450,000 = $22,500. Revenue NSW issues it as a secondary assessment, and the other owner is not liable for it.

Revenue NSW's own example for two residential properties worth $600,000 each shows both charges together. Total land value is $1,200,000, so ordinary land tax is $100 + 1.6% x ($1,200,000 - $1,075,000) = $2,100, and surcharge land tax is 5% x $1,200,000 = $60,000. The total is $62,100.

Who is a foreign person for land tax

Revenue NSW treats you as foreign unless you are an Australian citizen, or a permanent resident who has been in Australia for 200 days or more in a calendar year, which need not be consecutive. A permanent resident who has not been in Australia for 200 days in the calendar year is a foreign person and may owe the surcharge. Revenue NSW also describes the test from the other side, as about 165 days or more overseas (166 in a leap year), and words the cut-off slightly differently on two of its pages. The rule itself is stated as 200 days present. Taken literally, Revenue NSW's description leaves holders of temporary visas as foreign persons, and the home exemption below lists only permanent, partner and retirement visa holders. Its Surcharge Assist Tool or land tax team can confirm how a particular visa is treated.

This is a different test from the one for duty. For surcharge purchaser duty the 200 days are measured in the 12 months before the contract. For land tax they are measured in a calendar year. Someone can pass one test and fail the other.

Companies and trusts have their own rules:

• Companies. A company is foreign if individuals who are not ordinarily resident in Australia hold a substantial interest, which Revenue NSW sets at 20% for one person, or 40% for two or more together. The test looks at shareholders, not directors.
• Trusts. A trust may be liable where any beneficiary is a foreign person. This covers special trusts, discretionary trusts and fixed trusts. See the trusts guide.

Revenue NSW has an online Surcharge Assist Tool that helps individuals assess their foreign status, and Revenue Ruling G 009 sets out the Chief Commissioner's interpretation.

What counts as residential land

Residential land includes land with a home on it or being built, individual strata lots that are lived in or suitable to be lived in as separate homes, utility lots, land use entitlements that give a right to occupy a separate home, and vacant land zoned for residential or mainly residential use. Land used for primary production is not residential land for this purpose.

The home (principal place of residence) exemption

Revenue NSW offers an intended principal place of residence exemption. It does not apply automatically, and you must apply for it.

• Who can apply. Foreign persons who hold a permanent visa, a partner (provisional) visa (subclass 309 or 820), or a retirement visa (subclass 405 or 410).
• Residence requirement. From 2023, you must keep using and occupying the land as your home and be physically in Australia for a continuous period of 200 days during the calendar year. The Chief Commissioner may waive this in exceptional circumstances.
• Deadline. Apply by 31 March of the year for which you want the exemption, or by the due date of your assessment notice, whichever comes first.
• Evidence. You provide proof of the principal place of residence and a copy of your visa grant notice. You then give either an international movement record, if you were assessed before and lived there for the 200 continuous days, or a declaration of your intention to use and occupy the property for 200 continuous days in the current year.
• How. The application is lodged as a return in Land Tax Online.

Revenue NSW notes that this exemption differs from the ordinary land tax home exemption, and that you can qualify for one and not the other. It can investigate exemptions going back 5 years.

Other exemptions cover residential land used for commercial purposes, Australian-based developers and build-to-rent.

Keeping your foreign status up to date

If you are not an Australian citizen and own land in NSW, you must update your foreign status in Land Tax Online when your residency affects your liability. New customers must do this by 31 March, and others by the assessment notice due date. If the update changes an assessment, Revenue NSW sends a new notice, applies payments you have made, and refunds any credit. It can penalise false or misleading information.

Frequently asked questions

firbapproval.com.au is an independent guide. It is not affiliated with, endorsed by or connected to the Foreign Investment Review Board, the Australian Treasury or the Australian Taxation Office. We do not lodge or process applications. Applications are made to the ATO. General information only, not legal, tax, migration or financial advice.