Navigating the complexities of tax laws can be a daunting task for any Australian, but for one Sydney family, a lack of awareness about a technicality in land tax legislation has resulted in a staggering $116,000 bill that has left them reeling. This cautionary tale serves as a stark reminder to all homeowners to stay informed about tax laws that could impact them, especially if their circumstances change.
Susan, a Scottish-born permanent resident of Australia, and her Australian-born husband, James, were hit with the unexpected land tax bill after Susan spent nine months in Scotland to care for her ailing mother. During this time, she was out of the country for over 270 days, unknowingly triggering a New South Wales tax law clause that classifies her as a ‘foreign buyer’.
Under NSW law, foreign buyers who purchase property in the state are subject to a land tax surcharge, which, for properties bought between July 1, 2017, and December 31, 2024, is a hefty eight per cent of the home’s value. Permanent residents can be exempt from this tax, but only if they reside in Australia for at least 200 continuous days within the land tax year.
The family’s ordeal began when they received a letter from Revenue NSW, informing them of the surcharge due to Susan’s absence from the country. The timing could not have been worse, as they were already dealing with the emotional strain of a family health crisis.
‘We certainly didn’t know anything about it. We went to care for Mum… we had no choice,’ Susan explained, expressing her shock at the situation. Despite applying to Revenue NSW to have the tax bill waived under ‘exceptional circumstances’, the family’s request was denied.
James, who never considered his wife a ‘foreigner’ under tax law, was equally stunned. ‘We don’t consider ourselves foreigners, so it’s not something we thought about, really,’ he said. The property in question is not an investment but their family home, which adds a layer of personal distress to the financial burden.
As they attempt to navigate this taxing predicament, the couple is now faced with monthly payments of $11,000 to cover the bill, having already paid out $33,000. ‘I don’t understand why our situation isn’t exceptional, because I can’t think of anything worse,’ James lamented.
This case serves as a reminder that tax laws can have unexpected consequences, especially when circumstances change. It highlights the importance of understanding the tax implications of your residency status and travel habits. For homeowners and permanent residents who may spend extended time abroad, staying informed about land tax surcharges and related regulations can help prevent unforeseen financial burdens.
Have you ever encountered an unexpected tax bill due to a technicality? Were you aware of the land tax surcharge for foreign buyers in NSW? How do you stay updated on changing tax regulations? We’d love to hear your thoughts and experiences—share them in the comments below! Your insights could help others avoid a similar financial shock.
Also read: Will there be new taxes this year? Here’s Treasurer Jim Chalmers’ response
Please do a follow up on this on whether or not other states have a similar tax that will or may affect home owners in this position.
If they already owned this home, this is just a money grab, particularly as he is a citizen. It’s their family home! Or did they buy it after they got back?
We’re QLD. About 10 years ago land tax was ‘if total land value over $600k per person, PPR only included if absent’. We were doing multiple trips to NZ to check on my elderly Father. We owned our QLD home here plus had a QLD investment property, just in Hubby’s name (he is Australian citizen only, by birth) He was working full time Oz, using up long service leave visiting my Father….. when we get back here after multiple trips during the year, a bill in the mail box for land tax. Land tax people had seen exit record, but not multiple re-entry….. we sent letter, JP endorsed, with details of employer, and most recent re-entry etc and never heard from them again
Many years ago I got hit with a multi thousand dollar tax bill. My offence was to have deemed to have sold a car within the 12 month period when the actual sale was two years after it had been bought and not kept the evidence relating to the actual and deemed dates. The ATO came looking for me a few years after I had returned to live in Australia so the evidence was overseas.
The power of the ATO scarred me and I took action to make myself a small target – this involved me selling positively geared real estate and using the proceeds to reduce non taxable debt so my taxable income went down. In the end it was the ATO who lost out.