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Foreign corporations who purchase residential-related property in NSW may be liable to pay an additional surcharge purchaser duty on top of any transfer duty.
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A corporation may need to pay surcharge purchaser duty to Revenue NSW when it acquires residential-related property in New South Wales (NSW).
Liability depends on whether the corporation is treated as a foreign person for surcharge purchaser duty.
This page explains how the foreign status of a corporation is determined. If you are looking for more general information, go to what is surcharge purchaser duty.
Revenue NSW recommends getting advice from a qualified legal or tax professional before you buy residential-related property through a corporation.
What is a foreign corporation
A common misconception is that only overseas-registered companies are affected by surcharge purchaser duty.
A corporation may be considered foreign for surcharge purchaser duty even if it was incorporated in Australia.
A corporation is considered foreign for surcharge purchaser duty if an individual not ordinarily resident in Australia, foreign corporation or foreign government holds a substantial interest or aggregate substantial interest in the corporation.
What is an interest
A person holds an interest of a specified percentage in an entity if the person, alone or together with one or more associates of the person:
controls that percentage of the voting power in the entity
holds interests in that percentage of the issued securities in the entity, or
would hold interests in that percentage of the issued securities in the entity if relevant options were exercised.
What is an associate
When working out whether a corporation is a foreign corporation for surcharge purchaser duty, a foreign person’s interest in the corporation may be combined with the interests of their associates.
An associate includes certain individuals, companies, partnerships, trusts and superannuation funds.
A person holds a substantial interest in a corporation if the person, alone or together with any one or more associates, holds an interest of at least 20% in the entity.
Example
Perfume Pty Ltd is an Australian-incorporated company that wants to purchase a residential property in Sydney.
The company has 4 beneficial shareholders:
3 Australian citizens each holding 25% of the issued shares, and
1 foreign person, Pietro, who is not ordinarily resident in Australia, and holds 25% of the issued shares.
Pietro holds a 25% interest in the corporation. Because this is at least 20%, Pietro holds a substantial interest in the corporation.
Because a foreign person holds a substantial interest, Perfume Pty Ltd is treated as a foreign corporation for surcharge purchaser duty. Surcharge purchaser duty is payable on the acquisition of the property.
Aggregate substantial interest
Two or more persons hold an aggregate substantial interest in a corporation if the persons, alone or together with one or more associates, hold an aggregate interest of at least 40% in the entity.
Example
Toffee Pty Ltd is an Australian company that wants to purchase a house in Bowral.
It has five shareholders in total—three of the shareholders—Tim, Thomas and Tracey—are foreign persons because they are not ordinarily resident in Australia.
Tim holds 15% of the issued shares, Thomas holds 10% of the issued shares and Tracey holds 15% of the issued shares.
Together, Tim, Thomas and Tracey hold 40% of the issued shares. This means they hold an aggregate substantial interest in the corporation.
Because Tim, Thomas and Tracey are foreign persons and together hold an aggregate substantial interest, Toffee Pty Ltd is treated as a foreign corporation for surcharge purchaser duty. Surcharge purchaser duty is payable on the acquisition.
Tracing a substantial interest
Tracing provisions in the Duties Act 1997 are used to determine whether a foreign person owns, or has an underlying beneficial interest in, property for surcharge purchaser duty purposes.
When applying these provisions, it is necessary to look beyond the immediate purchaser—such as an Australian company or trust—and trace through the layers of ownership and beneficial interest.
At each level, you must assess whether a foreign individual, corporation, or trust holds a substantial interest or an aggregate substantial interest in the relevant entity.
This tracing process continues through successive layers of ownership until it can be determined whether the purchasing corporation is ultimately foreign.
Example
Grevillea Pty Ltd purchases a residential property in NSW. One of its shareholders is Banksia Pty Ltd, which holds 30% of the issued shares in Grevillea Pty Ltd.
A foreign person, Priya, holds 100% of the shares in Banksia Pty Ltd.
As a result:
Banksia Pty Ltd is considered foreign as Priya holds a substantial interest and is a foreign person.
Grevillea Pty Ltd is a foreign corporation because Banksia Pty Ltd holds a substantial interest and is a foreign corporation.
Grevillea Pty Ltd will pay surcharge purchaser duty on this purchase.
Exemptions and concessions
A corporation may be eligible for an exemption or concession on surcharge purchaser duty if it meets certain requirements.
Read more about the surcharge purchaser duty exemptions for:
These surcharge purchaser duty exemptions and concessions are not automatic.
Your solicitor or conveyancer (legal representative) must lodge an application with Revenue NSW for assessment.
Need more detailed information?
Revenue Ruling G009: Definition of a foreign person outlines how Revenue NSW determines ‘foreign person’ status for surcharge purchaser duty and surcharge land tax, covering individuals, corporations and trusts.
If you realise that you paid the incorrect amount of duty or did not meet conditions that applied after your transaction, we encourage you to make a voluntary disclosure.
Foreign corporations who own residential property in NSW may also be liable for surcharge land tax.
Contact us
Call the duties team on 1300 139 814 or +61 2 7808 6916 if you are overseas. Staff are available Monday to Friday, 8.30am to 5.00pm AEST (excluding public holidays).
