Foreign Owner Property Surcharges: The Tax Trap That Catches Aussie Expats By Surprise

Here’s a sentence that makes a lot of Aussie expats choke on their morning coffee: you can be a born-and-bred Australian citizen and still get slugged with “foreign owner” property surcharges back home.

Wait, what? Stay with me, because this one is genuinely counterintuitive, it’s gotten more expensive over the years, and it catches people who never saw it coming.

States like Victoria and New South Wales charge extra property taxes on “foreign” owners, with two stated aims: cooling foreign demand that pushes up house prices, and making overseas investors chip in for the housing and infrastructure their buying creates. Fair enough in principle. The problem is the definition of “foreign”, which sweeps in more Australians living overseas than most people realise.

First, untangle the two different surcharges

The original muddle most people fall into (and, frankly, the original version of this article did too) is treating this as one tax. It’s actually two completely separate ones, and they work differently.

The first is a one-off stamp duty surcharge, paid once when you buy. The second is an annual land tax surcharge, paid every year you hold the property. One is a single hit at purchase; the other is a recurring cost that quietly compounds for as long as you own the place. You need to plan for both, because together they can turn a sensible-looking investment into a money pit.

Who counts as a “foreign person”?

Broadly, you’re treated as foreign if you’re not an Australian citizen and not a permanent resident, and (for the annual land tax surcharges) you don’t ordinarily live in Australia. Crucially, holding a temporary visa doesn’t save you. So an Australian working overseas long-term, or someone in Australia on a temporary visa like the business innovation and investment stream, can find themselves on the wrong side of the line. The exact tests differ between the stamp duty and land tax versions and between states, which is exactly why this trips people up.

Victoria

Victoria hits foreign buyers and owners on both fronts, and the rates have climbed steadily.

On purchase, foreign buyers of residential property pay foreign purchaser additional duty, currently 8% on top of ordinary stamp duty. The original article quoted 7%; it rose to 8% back in 2019.

Then, every year you hold Victorian land as an “absentee owner”, the absentee owner surcharge applies. This has marched upward relentlessly: it was 0.5% in 2016, then 1.5%, then 2%, and from the 2024 land tax year it sits at 4%, applied on top of ordinary land tax with no tax-free threshold of its own. The original article’s “1.5%” is now well out of date, and at 4% a year, this is a serious ongoing cost.

One important recent development: there had been legal argument about whether Victoria’s absentee owner surcharge was even validly imposed. The High Court settled it in October 2025, confirming the surcharge payable from 1 January 2018 is valid. So there’s no wishful-thinking escape route there; if it applies to you, it applies.

The residential land caught includes not just houses but vacant land bought to build on, derelict sites intended for residential development, and predominantly-residential mixed-use developments.

New South Wales

NSW works the same way, with two surcharges, and it’s now the most expensive state of the two.

On purchase, foreign buyers pay surcharge purchaser duty, which rose to 9% from 1 January 2025 (up from 8%, and a long way from the 4% it launched at in 2016). That’s 9% on top of ordinary transfer duty, paid once.

Then annually, foreign owners of residential land pay surcharge land tax, which increased to 5% from the 2025 land tax year (up from 4%). And here’s a sting the original flagged correctly and which still bites: foreign owners don’t get the land tax tax-free threshold that ordinary owners enjoy, and the surcharge applies even where the land would otherwise have a nil assessment. So the surcharge starts from the first dollar of land value.

The residential land caught includes parcels bought to build a home on, land already holding one or more homes, and vacant residential-zoned lots with no commercial building.

The treaty twist that just disappeared

Here’s a development that caught a lot of advisers out, so it’s worth knowing even if it sounds technical.

For a while, NSW accepted that citizens of certain countries with tax treaties with Australia (including New Zealand, Germany, Finland, India, Japan, Norway, South Africa and Switzerland) were exempt from these surcharges, because the treaties overrode the state law. Some even got refunds.

That door has closed. Because the treaties operate as federal law, the Commonwealth changed the federal law to remove the conflict, and from 8 April 2024 citizens of those countries are no longer exempt from the NSW surcharges. So if you’d been counting on a treaty to save you, or you read older advice suggesting it might, that planning is dead. It’s a neat illustration of why “I read it online” is a dangerous basis for a six-figure property decision.

The bottom line

Foreign owner surcharges are two taxes, not one: a one-off stamp duty hit (8% in Victoria, 9% in NSW) and an annual land tax surcharge (4% in Victoria, 5% in NSW) that recurs every year you hold the property. They can apply to Australians living overseas and to temporary visa holders, the rates have only ever gone up, the Victorian version has been confirmed valid by the High Court, and the old treaty exemptions are gone. None of this means you shouldn’t invest in Australian property. It means you should know the full holding cost before you sign, not after.

Tread your own path. Just add up every surcharge along it first.

Buying, holding or unsure? Get your status checked before it costs you.

Whether you’re caught by these surcharges turns entirely on your residency and visa status, and the difference between “foreign” and “not foreign” can be tens of thousands of dollars a year. State surcharges also interact with the federal rules on capital gains, withholding and the main residence exemption, so the full picture is rarely simple.

Our specialist expatriate tax team can assess where you stand and map out the most tax-effective way to invest in or hold Australian property while you’re overseas, working remotely with clients all over the world.

Book an appointment with our expat tax specialists today, ideally before you buy or sign anything. Your future self (and your hip pocket) will thank you.

General information only. This article doesn’t consider your personal circumstances and isn’t tax or financial advice. State surcharge rules and rates change frequently and differ between states. Speak to our specialist expatriate tax team today, or another registered tax agent, before acting.

References

1. State Revenue Office Victoria, “Absentee owner surcharge” (the 4% surcharge from the 2024 land tax year and the rate history): sro.vic.gov.au
2. State Revenue Office Victoria, “Foreign purchaser additional duty (current rates)” (the 8% additional duty rate): sro.vic.gov.au
3. Revenue NSW, “2024-2025 State Budget” (surcharge purchaser duty increase to 9% from 1 January 2025 and surcharge land tax increase to 5% from the 2025 land tax year): revenue.nsw.gov.au
4. NSW Government, “Adjustment to foreign investor surcharges and indexation of land tax thresholds” (rate history and rationale): nsw.gov.au
5. Revenue NSW guidance on the removal of surcharge exemptions for citizens of certain tax treaty countries from 8 April 2024: revenue.nsw.gov.au