Surcharge Land Tax and Duty – Are Your Family Trusts at Risk in 2026?
Update: Current for 2025/2026 Financial Year
Significant legislative changes in NSW have permanently increased the costs associated with “foreign” ownership of residential land. More importantly, these changes continue to catch many Australian-resident families unaware.
If you hold residential property in a Discretionary Trust (Family Trust), you may be unknowingly liable for thousands of dollars in extra taxes—even if all your family members live in Australia.
Here is what you need to know about the confirmed 2025/2026 Surcharge Land Tax and Purchaser Duty rates, and how to protect your trust.
The “Hidden” Trap for Local Families
Many Australian trustees believe these surcharges only apply to overseas investors. This is a dangerous misconception.
Under NSW legislation, a Discretionary Trust is deemed to be a “foreign trust” if any potential beneficiary is a foreign person. Because most standard Trust Deeds are drafted with a wide definition of beneficiaries (often including “distant relatives,” “cousins,” or “corporations”), your trust is likely considered “foreign” by default.
If your Trust Deed has not been specifically amended to exclude foreign persons, Revenue NSW may deem your trust liable for:
- Surcharge Purchaser Duty on new purchases.
- Surcharge Land Tax on existing holdings.
Confirmed 2025/2026 Rates: The Cost of Compliance Failure
Effective from 1 January 2025, the NSW Government increased the surcharge rates. These higher rates apply to all assessments for the 2025 and 2026 land tax years.
| Tax Type | New Rate | Financial Impact Example ($1M Property) |
|---|---|---|
| 1. Surcharge Purchaser Duty (Stamp Duty) |
9% (Increased from 8%) |
Standard duty + $90,000 extra in surcharge duty. |
| 2. Surcharge Land Tax (Annual) |
5% (Increased from 4%) |
$50,000 extra per year tax bill. |
Note: Unlike standard land tax, there is no tax-free threshold for the surcharge. It applies from the first dollar of land value.
Important Note on Thresholds
While the standard land tax thresholds have been frozen at 2024 levels ($1,075,000 general threshold) for the 2026 tax year, this does not apply to the surcharge. The 5% surcharge applies to the entire land value.
How to Fix It: Irrevocable Deed Amendment
To exempt your trust from these surcharges, it is not enough to simply “not distribute” to foreign relatives. You must legally and permanently change the rules of the trust.
Requirements for a valid Deed of Variation:
- Irrevocably exclude “foreign persons” (as defined in the Duties Act 1997) from being beneficiaries.
- Ensure the terms of the trust cannot be amended in the future to include foreign persons.
Warning: This amendment must usually be signed before you enter into a contract to buy property (to avoid Surcharge Duty) or before the Land Tax taxing date (31 December) to avoid the Surcharge Land Tax for the coming year.
What Should You Do Now?
If your Family Trust owns residential real estate in NSW—or is planning to buy—you must review your Trust Deed immediately.
- Check your Deed: Does it explicitly exclude foreign persons?
- Verify Beneficiaries: Have any family members moved overseas recently? (This can change their status to “foreign persons” and trigger tax issues).
- Act Quickly: With the rate now at 5% annually, delaying a Deed update can be a costly mistake.
The Quinn Group can review your existing Trust Deed and prepare the necessary Deed of Variation to ensure you are not paying unnecessary “foreign” taxes.
Ready to discuss your Trust Deed?
Book a confidential discussion regarding your Land Tax liability today.
NEED HELP? This article provides general information and should not be considered legal or tax advice. For personalised guidance, please contact our expert team of tax accountants at The Quinn Group by calling 1300 QUINNS (1300 784 667) or +61 2 9223 9166, or submit an online enquiry form to arrange an appointment.
