On 18 June 2024, the NSW Treasury published the NSW State Budget 2024-25 (State Budget), which will revise several pieces of legislation regulating taxes and duties in NSW. These changes will be implemented once the Revenue Legislation Amendment Bill 2024 is passed and will significantly impact property acquisitions made by foreign persons.
Land tax and duties – surcharge increases
Surcharge purchaser duty and surcharge land tax applies to residential land bought or owned by foreign persons whether as individuals, corporations, trustees or a trust.
Amendments to the Duties Act 1997 will increase the rate of surcharge purchaser duty from eight per cent to nine per cent for all transactions occurring on or after 1 January 2025. Amendments to the Land Tax Act 1956 will increase the surcharge land tax from four per cent to five per cent as at midnight 31 December, commencing in the 2024 land tax year.
These amendments coincide with recent changes to federal law. Citizens previously exempt from surcharge purchaser duty (New Zealand, Finland, Germany, India, Japan, Norway, South Africa and Switzerland) now need to pay if they enter into an agreement to purchase residential property in NSW on or after 8 April 2024.
If you are a foreign person seeking to purchase residential property in NSW, it is important to seek legal advice as to whether you are exempt or liable for these surcharges and remain aware of the increased rates.
Land tax threshold
The State Budget announced that the land tax thresholds will be fixed at their 2024 levels, mirroring other jurisdictions. This means that for the 2025 land tax year onwards, the land tax threshold will remain at $1,075,000 and the premium threshold will remain at $6,571,000. This is expected to increase the NSW Government's revenue by $1.5 billion over the next four years.
The change brings the NSW Government in line with the approach taken in Victoria and most other Australian jurisdictions who have already implemented a fixed land tax threshold.
Summary
The State Budget's decision to fix land tax thresholds and increase surcharge purchaser duty and land tax rates will result in liable property owners and purchasers 'forking out' more than the previous financial year.
It is essential that foreign investors seek advice on the taxes and duties payable when considering purchasing property in NSW. Foreign investors should also conduct comprehensive evaluations and weigh the financial implications carefully before committing to acquisitions.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.