Good news for New Zealand, Finland, German and South African Citizens – NSW surcharges no longer apply

Revenue NSW have announced in a media release that foreign citizens from New Zealand, Finland, Germany and South Africa (Listed Nations) are no longer required to pay surcharge purchaser duty or surcharge land tax on residential property in NSW.  It has been determined that the NSW surcharge provisions are inconsistent with international tax treaties with the Listed Nations.

In our previous articles, we highlighted the sting caused by surcharge land tax (currently 4% from the 2023 land tax year) and surcharge purchaser duty (currently 8%) (surcharges). This will no longer apply to citizens of the Listed Nations.

Until now the surcharges applied to all ‘foreign persons’ as defined by reference to the definition under the Foreign Acquisitions and Takeovers Act 1975 (Cth), modified as follows:

• an individual not ordinarily resident in Australia (except for Australian citizens), including:

  • permanent residents, and New Zealand citizens holding subclass 444 visas, who had not physically been in Australia for 200 days or more

  • all other visa type holders and foreign citizens (including New Zealand citizens on subclass 461 visas) regardless of if they have been physically in Australia for 200 days or more

• a corporation or trustee of a trust in which an individual not ordinarily a resident in Australia, a foreign corporation or a foreign government holds a substantial interest (20%)

• a trustee of a discretionary trust in which any beneficiary or potential beneficiary is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government.

Citizens from Listed Nations are now treated the same as Australian citizens, regardless of where they live in the world.

What has changed?

The international tax treaties entered into by Australia and the Listed Nations contain a non-discrimination clause. Broadly, these non-discrimination clauses provide that a citizen of the Listed Nation is not to be subjected to taxes in Australia of ‘every kind and description which is more burdensome’ than those imposed on an Australian. 

1. Individuals

Effective immediately, citizens of the Listed Nations who purchase or own residential property in their own capacity (not as trustee of a trust or via a partnership or corporation) will no longer be required to pay surcharges.

Revenue NSW have agreed to issue a refund to citizens of Listed Nations who paid surcharges on or after 1 July 2021, notwithstanding that section 2 of the Recovery of Imposts Act 1963 (NSW) limits the recovery of taxes to 12 months after the payment date. There is no right of objection to a Revenue NSW decision regarding refunds of surcharges. We can advise on applications for judicial review and ex-gratia relief.

Any interest or penalty tax paid on the surcharges will be refunded. Revenue NSW have stated they will pause action on any existing payment plans relating to surcharges for citizens of Listed Nations and arrange for a refund. See Revenue NSW’s Frequently asked questions for individuals.

2. Corporations and Trusts

Corporations and trusts which have an affiliation with one of the Listed Nations, may be eligible for a refund for surcharges paid on or after 1 July 2021.

Surcharges will no longer apply to non-individual entities if they are foreign persons solely by reason of holdings of a substantial interest (20%) by a person from a Listed Nation. Surcharges will still apply if a foreign person that is not from one of the Listed Nations directly or indirectly holds a substantial interest in the entity.

How will I receive my refund?

Revenue NSW have stated they will “proactively identify customers and transactions that may be eligible for the removal” of surcharges and will contact those identified to arrange for a refund. You will need to provide a certified copy of your passport or citizenship certificate and bank details. The refund is then expected to be processed within 28 days.

Other jurisdictions in Australia are also considering the announcements made by Revenue NSW. The State Revenue Office of Victoria have released a statement that they are considering the implications of the NSW announcement and will provide updates as required.

The takeaway

These changes significantly reduce the purchase and holding costs for citizens of New Zealand, Finland, Germany, and South Africa owning residential property in NSW.

We can assist with determining your eligibility for a refund, the refund applications, your property acquisitions, and structuring.

Authors: Lisa To and Hayley Constantine