Michael Murray Managing Director, Murray Property · 22+ years in property management across Sydney
An Australian citizen who moved to Singapore four years ago and kept her Darlinghurst apartment recently asked us whether she owed the 5% land tax surcharge. She’d been quietly budgeting for it, roughly $60,000 a year on her land value, and had started thinking about selling.
She doesn’t owe it. She never did. Australian citizens are never foreign persons for NSW surcharge land tax, no matter how long they’ve been away.
What she does have is a genuine tax problem, and a much larger one waiting if she sells at the wrong moment.
That gap, between the cost people brace for and the cost that’s actually coming, exists because “foreign” means three different things in Australian property law. Three agencies, three separate tests, three answers that can disagree. This page resolves all three.
Why there are three answers
There’s no single register of who counts as foreign. Instead:
The ATO decides whether you’re a foreign resident for tax, based on where you actually live
Revenue NSW decides whether you’re a foreign person for surcharge land tax and duty, using a similar but separate citizenship and days-present test
Treasury and FIRB decide whether you’re a foreign person for foreign investment, based on citizenship and visa status.
The tests don’t reference each other. You can fail one and pass the other two, which is precisely what happens to most Australian expats.
Test one , are you a foreign resident for tax?
This is the ATO’s test, and it’s the one that catches almost everyone reading this.
Australian tax residency has nothing to do with your passport. It’s a question of fact about where you actually live. There are four statutory tests, and you only need to satisfy one to be treated as a resident.
The resident test
Is the primary one. Do you reside in Australia according to the ordinary meaning of the word? The ATO looks at your physical presence, your family and business ties, where your assets sit, and your social arrangements. If you’ve genuinely relocated your life overseas, you generally stop residing here.
The domicile test
Catches people who intend to come back. If your domicile is Australian, you remain a resident unless the Commissioner is satisfied your permanent place of abode is outside Australia. Long stays in serviced apartments, a house left empty in Sydney, or an open-ended plan to return can all weigh against you.
The 183-day test
Applies if you’re in Australia more than half the income year, unless your usual place of abode is overseas and you don’t intend to take up residence here.
183
The Commonwealth superannuation test
Applies to members of the CSS and PSS schemes.
Fail all four and you’re a foreign resident for tax purposes. For most people who have moved abroad indefinitely, taken a job there, and set up a home, that’s the outcome.
What that costs you
No tax-free threshold. Australian residents pay nothing on the first $18,200. Foreign residents pay from the first dollar, 30% on income up to $135,000, rising from there. On a Darlinghurst apartment renting at $800 a week, that’s about $41,600 of gross rent taxed at 30% before any deductions.
Deductions survive. Interest, strata levies, council rates, management fees, repairs, depreciation, all still claimable, and negative gearing still works. Foreign residents are also exempt from the 2% Medicare levy.
Your main residence exemption is at risk. This is the expensive one. Sell while you’re a foreign resident and you can lose the capital gains exemption on your former home for the entire ownership period, not just the years you were away. Narrow life-events exceptions exist, and they are narrow.
Every sale has 15% withheld. Since 1 January 2025 the foreign resident capital gains withholding rate is 15% and the old $750,000 threshold is gone, so it applies to every property sale in Australia. Australian residents avoid it with a free ATO clearance certificate. Foreign residents can apply for a variation where the actual tax owed is less.
One thing to ignore for now
You’ll find articles describing a new “bright line” residency test, 183 days and you’re a resident, with a 45-day secondary rule and a three-year lock-in for people leaving. It was announced in the 2021 Budget and it is still not law as of August 2026. The four tests above remain the ones that apply.
It’s worth knowing about, because if it’s ever legislated it would make leaving Australian tax residency considerably harder. It is not worth planning around yet, and any adviser telling you otherwise is ahead of the legislation.
Test two, are you a foreign person for foreign investment?
This one is refreshingly simple, and it’s the test people worry about most unnecessarily.
Australian citizens are not foreign persons. Ever. Citizenship settles it, regardless of where you live or how long you’ve been gone. Dual citizens holding an Australian passport are covered too.
Permanent residents generally aren’t either, and sit outside the current restrictions on purchasing.
Everyone else generally is, foreign nationals, and temporary visa holders.
What that costs you
If you are a foreign person, established dwellings are closed to you. The ban that began on 1 April 2025 has been extended to 30 June 2029, with limited exceptions. New dwellings and vacant land remain available with approval.
You’ll also need foreign investment approval before buying, and you’ll be liable for the annual vacancy fee if your property sits vacant or isn’t genuinely available for rent for 183 days or more in a vacancy year. That fee doubled in 2024.
The obligation people miss isn’t the fee, it’s the return. You must lodge a vacancy fee return every year within 30 days of your vacancy year ending, even if the property was tenanted for all twelve months. It’s the most common compliance failure we see, and it’s entirely avoidable.
Test three, are you a foreign person for NSW surcharge land tax?
Revenue NSW runs its own test, and this is where the outcome most often surprises people in both directions.
Australian citizens are never foreign persons. The legislation deems Australian citizens to be ordinarily resident in Australia, whether or not they actually are. No surcharge, ever, regardless of how many years you’ve lived abroad.
Permanent residents face a days test. You’re not a foreign person if you’re “ordinarily resident”, which means you were physically in Australia for 200 or more days in the 12 months before the taxing date, and your stay here isn’t limited as to time. The days don’t need to be consecutive.
Put the other way round, and this is the number to remember: a permanent resident who spends 165 or more days outside Australia in a calendar year becomes a foreign person for surcharge land tax. That’s under six months away. It catches people who took a two-year secondment and never did the arithmetic.
New Zealand citizens holding a subclass 444 special category visa are treated the same way, subject to the same 200-day test.
What that costs you
Surcharge land tax is 5%, applied to the unimproved land value of your NSW residential property. There’s no tax-free threshold, it starts at the first dollar and sits on top of any ordinary land tax you already pay.
It’s assessed on what you hold at midnight on 31 December, and there’s no pro-rating. Own the property on that date as a foreign person and you owe the full year.
Surcharge purchaser duty of 9% applies to acquisitions, tested at the contract date.
The second chance most people miss
A permanent resident who fails the ordinarily resident test can still be exempt on their principal place of residence if they use and occupy it continuously for 200 days during the land tax year. It has to be claimed, and the deadline is 31 March for the relevant year. Miss the claim and the exemption is gone even if you qualified.
The company and trust trap
If you own through a company or trust, foreign ownership of more than 20% can make the entity a foreign person, even an Australian-registered company. Discretionary trusts are especially exposed, because a trust can be caught if any potential beneficiary is a foreign person. If your holding structure was set up years ago and never reviewed, this is worth checking before December.
Four situations, worked through
The Australian citizen in Singapore. Foreign resident for tax. Not a foreign person for FIRB. Not a foreign person for land tax. She pays 30% from the first dollar of rent and faces a serious CGT decision if she sells, but no surcharge and no purchase restrictions. Her real risk is selling at the wrong time.
The permanent resident on a two-year posting to London. Likely a foreign resident for tax. Not restricted from buying. But if she spent fewer than 200 days in Australia in the calendar year, she’s a foreign person for surcharge land tax and owes 5% on her land value, assessed on 31 December with no pro-rating. She may be able to claim the principal place of residence exemption, by 31 March.
The Singaporean national who bought a new apartment in 2019. Foreign on all three tests. Income tax from the first dollar, 5% surcharge land tax annually, and an annual vacancy fee return regardless of occupancy. She can keep and rent the property; she can’t buy an established dwelling before 30 June 2029.
The Australian citizen coming home in March. Part-year residency applies, with different treatment either side of the change. Never a foreign person for land tax. If she’s considering selling her former home, the timing of the sale against her residency change is likely the single largest financial decision in the move.
The three mistakes that cost the most
Assuming your passport protects you from the tax. It doesn’t. Citizenship exempts you from the surcharge and the buying restrictions, not from foreign resident tax rates or the CGT exposure.
Selling while a foreign resident without advice. The main residence exemption loss is measured across your whole ownership period. On a property held twenty years in the inner east, the difference between selling before departure, during, or after returning can be six figures.
Not counting days. Permanent residents lose their exemption at 165 days abroad in a calendar year, and the test bites on one date with no pro-rating. Keep a record of your movements.
What to do next
Work out which of the three tests you fail. That determines everything else on this hub, what you’ll pay in tax, your surcharge position, and what happens if you sell.
Then get advice from a registered tax agent who works with expats. Residency is a question of fact, and the facts are yours.
We manage properties for owners across Singapore, Hong Kong, London and Dubai, and we’re happy to talk through the practical side, what management looks like from a distance, or what to organise before you leave. Get in touch and tell us where you’re based.
Frequently asked questions
Can I be a foreign resident for tax but not a foreign person? Yes, and for Australian expats it’s the usual outcome. Tax residency is about where you live; the foreign person tests turn on citizenship. An Australian citizen living permanently overseas is typically a foreign resident for tax and not a foreign person for either FIRB or NSW land tax.
Does holding an Australian passport exempt me from the land tax surcharge? Yes. Australian citizens are deemed ordinarily resident in Australia for surcharge land tax purposes and are never foreign persons, regardless of how long they’ve lived overseas.
How many days can a permanent resident spend overseas before the surcharge applies? You need at least 200 days in Australia in the 12 months before 31 December. Spend 165 or more days abroad in a calendar year and you’ll generally be treated as a foreign person for that land tax year.
Have the new 183-day residency rules started? No. The proposed bright-line framework was announced in the 2021 Budget and has not been legislated as of August 2026. The four existing statutory tests still apply.
Is my company or trust a foreign person? Possibly. Foreign ownership above 20% can make an entity a foreign person for NSW surcharge purposes, including Australian-registered companies. Discretionary trusts are particularly exposed. Have your structure reviewed if it hasn’t been looked at recently.
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Disclaimer
The data, figures, and market statistics referenced in this article were current at the time of publication and are sourced from third-party providers including CoreLogic/Cotality, Domain, realestate.com.au, HtAG Analytics, PropTrack, and NSW Fair Trading, among others. Property market data changes frequently, median prices, rental yields, vacancy rates, clearance rates, and days on market figures are updated regularly by their respective providers and may have changed since this article was published. Readers are encouraged to verify all figures directly with the cited sources before making any decisions.
This article is intended as general information only. It does not constitute financial, investment, legal, or taxation advice. The information provided does not take into account your individual circumstances, objectives, financial situation, or needs. Before making any property investment, purchase, sale, or management decision, you should seek independent advice from a qualified financial adviser, solicitor, or property professional licensed in your state.
Murray Property is a licensed real estate agency operating in NSW. We are not financial advisers. References to rental yields, capital growth, or investment returns are based on publicly available market data and historical performance, which is not a reliable indicator of future results.
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