Stamp Duty and Land Tax in NSW: What Property Buyers and Investors Need to Know
Buying or owning property in New South Wales is not just about negotiating a price or signing a contract. Alongside the purchase price, there are a range of duty and tax considerations that buyers, investors and landowners must understand. For many buyers or investors, these costs come as an unwelcome surprise.
For advisers, prospective buyers or investors alike, understanding how these taxes work and how they affect practical decisions is essential. This article unpacks some key features of stamp duty (also known as transfer duty) on the sale of land and land tax in NSW and explains what property buyers, investors and businesses should keep in mind when planning transactions.
In New South Wales, transfer duty is governed by the Duties Act 1997 (NSW) and is payable on a wide range of “dutiable transactions”, including a transfer of land. In the case of a transfer of land, the duty is calculated on the ‘dutiable value’ of the property, which is generally the higher of the consideration paid for the property or the property’s unencumbered value. This indicates that even if you manage to negotiate a “bargain” purchase, for duty purposes the value will be assessed on what the property is truly worth.
In June, the Australian Bureau of Statistics announced that the national mean price for a residential dwelling in Australia reached $1,002,500. In terms of the purchase duty on a property of this value, a contract entered on 1 July 2025 would have a purchase duty of close to $40,000.
For residential property valued above $3,040,000, an additional premium rate of duty is imposed. This was designed to ensure that higher-end property transactions contribute more revenue. In practice, it has meant that luxury home buyers in areas such as Sydney’s Eastern Suburbs, North Shore or parts of the Northern Beaches routinely face duty bills well in excess of $200,000.
Aside from a regular transfer of land, there are a range of circumstances where duty liability arises for other real property-related transactions. For example, duty liability may arise on the following events:
While duty is payable on a range of property-related events, there are also exemptions, concessions and grants for purchasers in some circumstances, for example, first home buyers (when particular criteria apply).
For foreign purchasers (including companies) of residential-related property, there is additional liability for ‘surcharge purchaser duty’ on top of transfer duty.
The way transfer duty operates in practice has been shaped not only by legislation but also by judicial interpretation. Previous decisions have demonstrated that errors in drafting, sequencing of documents or even choice of transaction structure or sequencing can trigger duty assessments that might otherwise have been avoided.
Unlike transfer duty, which is generally a once-off payment at the time of an acquisition, land tax is an annual obligation under the Land Tax Act 1956 (NSW) and is calculated on land you own as at 31 December each year.
In most circumstances, a principal place of residence is generally exempt, meaning most ordinary homeowners will not encounter land tax. However, other properties such as investment properties, commercial holdings and vacant land are usually taxable. The rates are progressive, with higher value landholdings attract higher annual charges. Additionally, as with stamp duty, foreign owners may be subject to surcharge land tax, increasing the cost of holding property for international investors.
Exemptions may also apply in some circumstances if particular conditions are met. Examples of where an exemption may apply include:
Stamp duty must be budgeted for at the very beginning of the purchase process. Too often, buyers sign contracts only to discover that the duty adds a five or six-figure sum to the purchase price.
For investors, ownership structures such as trusts and companies are attractive for succession planning and asset protection, but they require careful planning. For instance, amendments to trust deeds, for instance, can in some cases trigger new duty liabilities and similarly, certain corporate restructures can attract duty even when no physical property changes hands.
Foreign investors must be particularly cautious. Between surcharge stamp duty and surcharge land tax, the cost of acquiring and holding property in NSW can be considerably higher than expected. Some foreign clients have found that the tax burden erodes the rental yield to the point where the investment is unsustainable.
Businesses may also need to factor in potential duty and taxes liability as a consideration in strategic decisions. A company relocating its headquarters may face not only incur transfer duty on a new premises but also ongoing land tax liabilities depending on the structure of its holdings. These costs can influence whether to buy or lease property, and how to manage property within a corporate group.
All buyers and investors should be aware that interest and penalties will apply for failing to pay tax and duties within the required timeframe, and in these circumstances, very limited exceptions apply.
Stamp duty and land tax remain central features of the property landscape in New South Wales. They represent additional transaction costs for buyers, investors and businesses.
Buyers and investors should understand that duty and taxes are likely to apply, to budget for them early and to seek additional advice when needed on how best to structure ownership and manage ongoing liabilities. For advisers, engaging and working with real property and commercial lawyers who understand the implications of duty and tax liability can be key.
It is always recommended that to seek professional advice before entering into any real property or real property-related transactions.
This article is general information only and does not constitute legal advice. For advice specific to your situation, please contact Chamberlains Law Firm.
If you have any questions about stamp duty and land tax in NSW, contact our Property Law Director Marissa Dimarco at 1300 676 823