When purchasing property in New South Wales, most buyers focus on saving a deposit, securing finance, and budgeting for transfer duty (commonly known as stamp duty). However, for some purchasers, there is another significant cost that can substantially increase the overall acquisition expense and sometimes overlooked. This is Surcharge Purchaser Duty (SPD).
With property values remaining high across NSW, understanding how this surcharge operates is essential for anyone considering the purchase of residential property.
What Is Surcharge Purchaser Duty?
Surcharge Purchaser Duty is an additional duty imposed on certain purchasers who are classified as “foreign persons” and acquire residential-related property in NSW.
Importantly, this surcharge is payable in addition to the standard transfer duty that applies to property transactions. For contracts entered into on or after 1 January 2025, the surcharge rate is 9% of the dutiable value of the residential-related property.
To put this into perspective, a foreign purchaser acquiring a residential property worth $1 million could be liable for an additional $90,000 in surcharge duty, on top of the ordinary transfer duty payable.
For this reason alone, understanding whether the surcharge applies should form part of every purchaser’s due diligence before signing a contract.
Who Is Considered a “Foreign Person”?
One of the most misunderstood aspects of Surcharge Purchaser Duty is the definition of a “foreign person” and who is captured in this group. Many buyers assume the surcharge only applies to overseas investors, but the rules are far more complex.
For surcharge purchaser duty purposes, individuals, corporations, and trustees of trusts can all be classified as foreign persons. Generally, a person is considered a foreign person unless they fall within one of the recognised exemption categories.
For individuals, you will generally not be considered a foreign person if you are:
- An Australian citizen;
- Ordinarily resident in Australia;
- An exempt permanent resident;
- A holder of a Retirement Visa (subclass 405 or 410) who satisfies the relevant residency requirements; or
- In certain circumstances, a holder of a Partner (Provisional) Visa (subclass 309 or 820) who meets the applicable residency requirements.
A key point for property buyers is that holding permanent residency alone does not automatically remove surcharge liability. To be considered “ordinarily resident in Australia,” a person generally must be a permanent resident (or eligible visa holder) and have been physically present in Australia for at least 200 days during the 12 months preceding the transaction.
Similarly, trusts and companies may be treated as foreign persons depending on their ownership structure, beneficiaries, or control arrangements. This can create unexpected surcharge obligations even where the trust or company is established in Australia.
Because the foreign person rules can be highly technical, purchasers should seek professional advice if there is any uncertainty regarding their residency status or ownership structure before entering into a contract.
What Properties Are Affected?
Surcharge Purchaser Duty generally applies to residential-related property in NSW.
This can include:
- Residential land containing a dwelling;
- Vacant land zoned or capable of residential development;
- Strata units and apartments;
- Certain interests in residential-related property;
- Certain options to purchase residential property; and
- Certain partnership interests involving residential-related property.
The scope of the legislation is broader than many buyers expect. Even transactions involving trusts, companies, or indirect ownership structures may trigger surcharge obligations in certain circumstances.
Why Buyers Need to Plan Ahead
Unlike many other transaction costs, Surcharge Purchaser Duty cannot simply be treated as an afterthought.
Most lenders do not provide finance for duty costs, meaning purchasers generally need to fund the surcharge from their own resources. As a result, the surcharge can have a significant impact on:
- Deposit requirements;
- Available cash reserves;
- Investment feasibility;
- Project profitability; and
- Overall affordability.
Common Traps and Misunderstandings
Over the years, many purchasers have been surprised to discover that they were liable for the surcharge despite believing they were exempt.
Permanent Residency Does Not Automatically Mean Exemption
One of the most common misconceptions is that obtaining Australian permanent residency automatically removes surcharge obligations.
In reality, additional residency requirements may apply, including satisfying the “ordinarily resident in Australia” test. A purchaser’s immigration status and physical presence in Australia can both be relevant when determining whether the surcharge applies.
Trust Structures Require Careful Review
Trusts are a particularly complex area of the legislation.
Even where a trust is established in Australia, the existence of foreign beneficiaries, potential foreign beneficiaries, or certain trust deed provisions may result in the trust being classified as a foreign person for surcharge purposes.
Many purchasers establish trusts for asset protection or estate planning reasons without realising the potential surcharge implications. A review of the trust deed before purchasing property can help identify risks and avoid unexpected duty liabilities.
Company Ownership Structures Can Also Trigger Liability
Australian-incorporated companies are not automatically exempt from surcharge purchaser duty.
Where foreign persons hold substantial interests or exercise control over a company, the company itself may be treated as a foreign person under the legislation.
Exemptions Are Not Automatic
While exemptions and concessions may be available in certain circumstances, eligibility often depends on satisfying specific legislative requirements and providing appropriate evidence.
Purchasers should not assume that an exemption applies simply because they hold a particular visa or residency status.
The Bigger Picture
Surcharge Purchaser Duty forms part of broader government measures aimed at regulating foreign participation in the residential property market and supporting housing affordability outcomes.
While these rules primarily target foreign investment, they can also affect individuals who live and work in Australia, as well as Australian trusts and companies with foreign ownership interests.
As property transactions become increasingly complex, understanding all acquisition costs before exchanging contracts is more important than ever.
Official Guidance
For further official guidance, purchasers should refer to Revenue NSW’s guidance on Surcharge Purchaser Duty and the Duties Act 1997 NSW.
Revenue NSW Surcharge Purchaser Duty
https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/transfer-duty/surcharge-purchaser-duty
Duties Act 1997 NSW
https://legislation.nsw.gov.au/view/html/inforce/current/act-1997-123
Final Thoughts
Surcharge Purchaser Duty does not affect every property purchaser, but for those who fall within the rules, the financial impact can be significant.
Whether you are a first-home buyer, investor, developer, permanent resident, or purchasing through a trust or company structure, understanding your position before signing a contract is essential.
Obtaining professional advice early in the process can help identify potential surcharge obligations, avoid costly surprises at settlement, and ensure that your property purchase proceeds with confidence.
Before committing to any residential property transaction in NSW, take the time to confirm whether Surcharge Purchaser Duty may apply. A small amount of planning today could save thousands of dollars tomorrow.
Contact Migrations Affairs to speak with our property experts for tailored advice on the circumstances and eligibility.
📧 info@migrationaffairs.com.au
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