Purchasing Residential Property at Auction in NSW with a Trust – Foreign Surcharge Duty and Foreign Surcharge Land Tax

Some people choose to bid at auction, without taking legal advice on the contract for sale.

This is a risky way to acquire a property, as the successful bidder will be obliged to enter into the contract without having any scope to review or change the terms of the sale.

Additionally, if the successful bidder chooses to use a trust as the purchasing entity then there is an added potential risk due to the way that stamp duty and land tax is assessed when a trust acquires  residential property in NSW.

Unless the trust excludes foreign beneficiaries, then Revenue NSW will deem the trust to be a Foreign Purchaser and additional stamp duty will be payable. Likewise, additional  Foreign Surcharge land tax will be payable annually, unless the trust deed includes an appropriate excluding clause.

We therefore recommend that any person who is seeking to acquire a residential property within a trust structure has their trust deed reviewed to confirm its Foreign Surcharge Duty status, before they either attend an auction to bid on a property.

Similar checks are also recommended prior to exchanging contracts in a private sale of residential property in NSW.