NSW surcharge land tax and the vacancy fee: what overseas owners actually pay

Michael Murray Managing Director, Murray Property · 22+ years in property management across Darlinghurst & Surry Hills

Two annual costs catch owners of Sydney property who live abroad. One is a state tax that can run to tens of thousands a year. The other is a federal fee most people never hear about until they have already breached it.
Neither applies to everyone. Both are decided by things you can check today.

Before anything else, are you a foreign person?

Nothing on this page applies to you unless you meet the definition, and it is narrower than most people assume.

Australian citizens are never foreign persons for NSW surcharge land tax. Not after five years abroad, not after twenty. The legislation deems Australian citizens to be ordinarily resident here whether they actually are or not. Dual citizens holding an Australian passport are covered too.

Permanent residents face a day count. You are not a foreign person if you were physically in Australia for 200 or more days in the 12 months before 31 December, and your stay is not limited as to time. Turned around, the number that matters: spend 165 or more days outside Australia in a calendar year and you will generally be treated as a foreign person for that land tax year.

Companies and trusts can be caught even when they look Australian. Foreign ownership above 20% can make an entity a foreign person, including an Australian-registered company. Discretionary trusts are particularly exposed, because a trust can be caught if any potential beneficiary is a foreign person.

If you have not settled this, are you a foreign person? works through all three tests properly.

The baseline, ordinary NSW land tax

Every owner of NSW land faces this, foreign or not. It applies to investment properties, holiday homes and vacant land, but generally not to your principal place of residence.

For the 2026 land tax year:

Land value	Tax payable
Up to $1,075,000	Nil
$1,075,001 to $6,571,000	$100 plus 1.6% of the value above $1,075,000
Above $6,571,000	$88,036 plus 2% of the value above $6,571,000

Four things worth knowing:

It is on land value, not property value. The unimproved value of the land, as assessed by the Valuer General. For an apartment, your share of the block. This is why two properties worth the same can produce very different bills, a Surry Hills terrace carries far more land value than a unit in a tower.

It is a three-year average. Revenue NSW averages your land value across three years rather than using the current figure, which smooths out spikes but also means a good year keeps affecting you afterwards.

The thresholds are frozen. They have been fixed at 2024 levels since the 2025 land tax year, with no annual indexation. As land values rise, more owners drift over the line each year without buying anything. The Treasurer is due to review this by June 2027.

Values are aggregated. All your NSW land is combined, so a second property can push the total over the threshold even when neither would alone.

The 5% surcharge

If you are a foreign person, surcharge land tax applies on top of any ordinary land tax.

• The rate is 5%, increased from 4% for the 2025 land tax year
• There is no tax-free threshold. It applies from the first dollar of land value
• It applies to residential land only, but that includes your principal place of residence, the home exemption does not shield you from the surcharge
• It is assessed on what you hold at midnight on 31 December, with no pro-rating. Own it on that date as a foreign person and you owe the full year
• It is assessed per parcel, proportional to your ownership share

The combination of no threshold and no pro-rating is what makes it bite. Buy in November, sell in February, and you still pay a full year.

Four owners, same suburbs, very different bills

An Australian citizen living in Singapore. Surry Hills terrace, land value $1,200,000. Ordinary land tax $2,100. Surcharge nil, citizenship exempts her. Total: $2,100.

A foreign national. Same terrace, same land value. Ordinary land tax $2,100. Surcharge $60,000. Total: $62,100.

A permanent resident who spent 170 days overseas last year. Darlinghurst apartment, land value $600,000. Ordinary land tax nil, the land value is well under the threshold. Surcharge $30,000, because the surcharge has no threshold at all. Total: $30,000.

That third case is the one people do not see coming. She owes nothing in ordinary land tax and thirty thousand dollars in surcharge, on a property that never triggered a land tax bill before she started travelling.

A foreign national with a Paddington terrace, land value $2,000,000. Ordinary land tax $14,900. Surcharge $100,000. Total: $114,900 a year.

Figures are illustrative and use 2026 thresholds. Your actual land value comes from your Valuer General notice, not from what the property is worth.

The permanent resident second chance

If you are a permanent resident who failed the 200-day test, there is one avenue back.

You can still be exempt on your principal place of residence if you use and occupy it continuously for 200 days during the land tax year.

It has to be claimed, and the deadline is 31 March. Miss it and the exemption is gone for that year even if you qualified on the facts.

Worth noting separately: from the 2026 land tax year, owners claiming the principal place of residence exemption must together hold at least a 25% interest in the property. That is a general rule, not a foreign-person one, but it catches some family ownership structures.

The 183-day test

Your dwelling must be residentially occupied, or genuinely available for rent, for at least 183 days in each vacancy year. Occupancy counts if:

• You or a relative genuinely lived there
• It was leased under agreements with minimum 30-day terms
• It was genuinely available on the market at market rent, again on 30-day-plus terms

That 30-day minimum matters. Short-stay letting through Airbnb and similar platforms generally does not count toward your 183 days. Owners who thought holiday letting kept them compliant have discovered otherwise.

The 183 days can be made up of multiple periods, each at least 30 days long.

The vacancy year is not the financial year

Your vacancy year runs 12 months from the occupation day for your dwelling, a date unique to your property. It does not align with the financial year, the calendar year, or the land tax year. Everybody gets a different date, which is part of why the deadline gets missed.

The return is required whether or not the fee is

This is the trap, and it is the single most common compliance failure we see.

You must lodge a vacancy fee return within 30 days of the end of every vacancy year, even if the property was tenanted for all twelve months. The return is how the ATO establishes that no fee is payable. It is not optional because you have nothing to declare.

If you do not lodge on time, the dwelling is deemed vacant and the fee becomes payable regardless of how the property was actually used. A fully tenanted apartment can attract a five-figure vacancy fee purely because a form was late. Civil penalties for non-lodgement apply on top.

What it costs

The fee is generally equivalent to the foreign investment application fee you paid when you bought — and since 9 April 2024 that amount has been doubled for relevant properties.

Application fees are tiered by property value and indexed each 1 July, so the figure depends on what you paid and when. For a property in the one-to-two-million bracket it typically runs to tens of thousands of dollars annually. Check the current schedule with the ATO rather than working from an older figure.

Four dates to diarise

What to do about it

Check your status before December, not after. The land tax position turns on one date. If you are a permanent resident approaching the 165-day mark, that is a number worth tracking through the year rather than discovering in January.

Find your occupation day if the vacancy fee applies to you, and put the return in your calendar permanently.

Check your holding structure. If your property sits in a company or trust set up years ago, the 20% foreign ownership rule may catch it. Worth a review before December.

Get the land value from the source. Your Valuer General notice, not an appraisal. Land value and property value are different numbers and only one of them matters here.

Talk to a registered tax agent. We are licensed real estate agents, not tax agents. We will flag the dates and keep the records your adviser needs, but the assessment itself is theirs to make.

If you are working out whether to keep the property at all, capital gains tax for foreign residents covers the other side of that decision, and managing from overseas covers the practical arrangements.

Frequently asked questions

I am an Australian citizen living overseas. Do I pay the 5% surcharge?

No. Australian citizens are never treated as foreign persons for NSW surcharge land tax, regardless of how long they have lived abroad. You may still be liable for ordinary land tax if your land value exceeds the threshold, and you may still be a foreign resident for income tax, which is a separate test.

How many days can a permanent resident spend overseas?

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 will generally be treated as a foreign person for that land tax year.

Does the surcharge apply to my own home?

Yes, if you are a foreign person. Surcharge land tax applies to all residential land you own, including your principal place of residence. The ordinary home exemption does not extend to the surcharge.

Is the surcharge pro-rated if I only owned the property part of the year?

No. It is assessed on what you hold at midnight on 31 December, and the full year applies.

Do I need to lodge a vacancy fee return if my property was tenanted all year?

Yes. The return must be lodged within 30 days of the end of each vacancy year regardless of occupancy. If you do not lodge, the property is deemed vacant and the fee becomes payable even though it was occupied.

Does short-term letting count toward the 183 days?

Generally not. Occupancy periods require lease or licence terms of at least 30 days, so most short-stay platform bookings do not qualify.

When is my vacancy year?

It runs 12 months from the occupation day for your dwelling, which is specific to your property. It does not align with the financial year or the land tax year.

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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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