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Two cases and a Bill - NSW duty and land tax surcharges impacting foreign buyers and landowners

Surcharge purchaser duty and surcharge land tax in New South Wales (NSW Surcharges), introduced in 2016, seemed settled law for foreign buyers and homeowners, or at least we thought so. The Federal Government's Treasury Laws Amendment (Foreign Investment) Bill 2024 (Bill) caused uncertainty when it was first introduced. However, the passing of the Bill and two recent cases have clarified the position in the state tax landscape.

Update to Federal Legislation

On 27 March 2024, the Bill was passed in both houses without amendment. The Bill will be enacted once it receives Royal Assent. The amendments are retrospective, applying from 1 January 2018.

The Bill inserts section 5(1) to the International Tax Agreements Act 1953 (Act). The new section restricts the operation of Double Tax Agreements (DTAs) so that they are:

‘subject to anything inconsistent with the provision contained in a law of the Commonwealth, or of a State or Territory, that imposes a tax other than Australian tax, unless expressly provided otherwise in that law’.

The Bill was introduced to the Federal Parliament on 7 February 2024 causing a stir in the state taxes landscape on whether state tax authorities would change their administrative practices.

Revenue NSW has previously taken the position (see announcements on 21 February 2023 and 29 May 2023 and our previous article here) that NSW Surcharges were inconsistent with Australia’s DTAs with eight countries which contain a non-discrimination clause: New Zealand, Finland, Germany, India, Japan, Switzerland, Norway and South Africa. Revenue NSW processed refunds for NSW Surcharges paid by citizens of the eight nations on or after 1 July 2021.

Other states and territories remained largely silent on the issue, continuing to levy surcharge taxes as normal. State Revenue Office (SRO) Victoria’s position did not change, announcing in March 2023 that ‘the SRO will continue to apply the Victorian provisions to all foreign purchasers and absentee owners’.

The Bill provides state revenue authorities with the green light to levy surcharge taxes on citizens of the eight nations. Whilst Revenue NSW may have the power to go back and issue reassessments,[1] their administrative practices have been consistent with announcements on their website, concerning the eight DTAs. Revenue NSW’s website currently contains an alert that ‘Upcoming changes to federal legislation will mean that these citizens may now need to pay’ ‘surcharge duty for future purchases of residential property in NSW’ and ‘surcharge land tax on future land tax assessments for residential property they own in NSW’.

This seems to suggest that Revenue NSW may only levy NSW Surcharges on these citizens for liabilities occurring after the enactment of the Bill. Revenue NSW have not issued reassessments or clawed back refunds from citizens of the eight nations for the period 1 July 2021 to date. It is likely that NSW surcharges will apply to citizens of the eight nations from the date the Bill receives Royal Assent onwards.

Revenue NSW encourage foreign buyers and landowners to monitor their website for updates. Revenue NSW will likely update their website with ‘Frequently Asked Questions’ to address concerns for those who entered into contracts between 1 July 2021 and the date the Bill receives Royal Assent.

Recent cases regarding surcharges for discretionary trusts

The recent decisions of Khalil & Associates Pty Ltd ATF The George Khalil Family Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 23 (Khalil & Associates) and Chloe Adolphi Pty Ltd as trustee for The Chloe Adolphi Family Trust v Chief Commissioner of State Revenue [2024] NSWCATAD 48 (Adolphi) show that Revenue NSW’s strict requirements for discretionary trusts being ‘foreign trusts’ are still proving onerous for taxpayers.

The default position in NSW is that trustees of discretionary trusts are deemed to be foreign persons unless the trust deed irrevocably excludes foreign persons. This requirement was introduced on 24 June 2020, with trustees scrambling to amend their trust deeds by 31 December 2020 in order for the past and future NSW Surcharges not to apply (see our previous article here).

Khalil & Associates

In Khalil & Associates the trustee made the following amendment to the trust deed via an Amending Deed:

Any foreign beneficiary that may exist in this trust is irrevocably excluded from receiving any current, or future trust distributions. For the avoidance of doubt this clause will supersede any other clause under this deed.

The term ‘foreign beneficiary’ was not defined.

The issue was whether the Amending Deed had satisfied the requirements of section 5D of the Land Tax Act 1956 (NSW) and avoided liability for surcharge land tax. The Tribunal held that the amendment was unsuccessful in precluding the trust from being a foreign trust. The Tribunal accepted the Commissioner’s arguments that:

  1. the term ‘foreign beneficiary’ does not have the same meaning as ‘foreign person’ because the words are different; and 

  2. the Amending Deed did not prevent the trustee from making amendments in the future to make a foreign person a potential beneficiary of the trust.

This case serves as a reminder that any amendments to a trust deed require careful drafting.


In Adolphi a discretionary trust was established in April 2021 and acquired a residential property in NSW in May 2021. In December 2022, after Commissioner had determined the trustee was liable to surcharge land tax for the 2021 land tax year, the trustee and the settlor executed a Deed of Rectification. The Deed purported to give effect to their original intention that no foreign persons were entitled to benefit from the trust.

The Tribunal upheld the assessment of surcharge land tax as contemporary documentary evidence indicated that there was no intention to exclude foreign beneficiaries at the time of the Trust’s establishment. This case serves as a reminder that a Deeds of Rectification may only be effective where it can be objectively determined that it actually reflects the parties’ original intentions. 

If you are a foreign buyer or landowner holding property in your personal name(s), by a trustee of a trust or company, please contact the authors.

Authors: Lisa To & Hayley Constantine


[1] Refer to section 9 (2) of the Taxation Administration Act 1996 (NSW).