The recent acknowledgement by Revenue NSW has now called into question the validity of other surcharge land tax and duty provisions in other Australian jurisdictions. Trustees and tax advisors alike are still waiting to see if the other revenue authorities will take the same stance as Revenue NSW. The Victorian SRO on 15 March 2023 announced it will not follow Revenue NSW's approach on international tax treaties to limit the imposition of foreign surcharge duty and land tax.
The other potential factor to consider is whether citizens from further countries that have a 'non-discrimination' articles in their tax treaties with Australia, beyond the ones listed in Revenue NSW's announcement, will become eligible for the refund (such as, Japan, Norway, India and Switzerland).Ari Armstrong, Maddocks Lawyers
An international tax treaty, also known as a double taxation agreement, is a bilateral agreement between the national governments of two countries that sets out the rules for how taxes will be levied on income and assets that cross their borders. These treaties are primarily designed to prevent double taxation (i.e. the same income being taxed twice in both countries) and to prevent tax evasion, but can also include an agreement that countries will not impose extra taxes or duties on each other’s citizens.
Relevantly, Australia’s tax treaties with New Zealand, Finland, Germany and South Africa all have ‘non-discrimination’ provisions which require each country, in levying taxes, to treat nationals of the other country no less favourably than it treats its own nationals in the same or similar position. “Taxes” in this treaties applies to “taxes of every kind and description” imposed at any level of government. These international tax treaties have been ratified and have been granted the authority of federal law.
For example, Item 1 of Article 24 in Chapter 5 of the Convention Between Australia And New Zealand For The Avoidance Of Double Taxation With Respect To Taxes On Income And Fringe Benefits And The Prevention Of Fiscal Evasion which was entered into by Governments of Australia and New Zealand on 19 March 2010 states that:
“Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected.”
Similar provisions are contained at:
As a result, Revenue NSW has decided that, with immediate effect, citizens of these countries who purchase residential property in NSW are no longer be required to pay surcharge purchaser duty or surcharge land tax. The immediate impact to Cleardocs customers is discussed in further detail in a related article published here.
Yes, but not yet on the issue of being inconsistent with international tax agreements. In the recent NCAT decision of Monisse v Chief Commissioner of State Revenue  NSWCATAP 27, a trustee appellant, who had not varied the trust deed to exclude foreign persons, submitted that it was unfair that he got a surcharge land tax assessment. The appellant contended that Revenue NSW failed to inform him prior to the relevant deadline of the changes to the legislation requiring an amendment to the trust deed to be made, and as a result Revenue NSW was estopped from levying surcharge land tax. This argument failed. The Tribunal held that concepts such as fairness and justice cannot intrude into the legislative taxation scheme, notwithstanding the fact that such a scheme might in certain circumstances operate harshly.
A very similar line of argument was run unsuccessfully by a trustee with surcharge assessment in Fujun Pty Ltd ATF Ni Family Trust v Chief Commissioner of State Revenue  NSWCATAD 412.
The 200 day requirement was discussed in this decision, i.e. section 5 of the FATA which stipulates when an individual who is not an Australian citizen is ordinarily a resident in Australia.
Whilst the trustees in both cases mounted unsuccessful “fairness” arguments, the new development may raise some queries. For instance, if a foreign person (either as an individual or as the sole potential beneficiary of a trust) ordinarily resides in (say) Finland, would they be treated the same as ordinarily residing here (as the non-discrimination article of the DTA requires)? The answer to this would require an analysis of Finnish law as to whether the person would be treated as a Finnish tax resident or “National of a Contracting State”.
Trustees and tax advisors alike are still waiting to see if the other revenue authorities will take the same stance as Revenue NSW. The Victorian SRO on 15 March 2023 announced it will not follow Revenue NSW’s approach on international tax treaties to limit the imposition of foreign surcharge duty and land tax. They have not, as yet, offered a reason for this position. The other potential factor to consider is whether citizens from further countries that have ‘non-discrimination’ articles in their tax treaties with Australia, beyond the ones listed in Revenue NSW’s announcement, will become eligible for the refund (such as, Japan, Norway, India and Switzerland). Trustees should continue to monitor changes in the way Revenue NSW and other state revenue authorities approach these surcharges and determine with their specialist tax and commercial advisers whether their deeds remain fit for purpose.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.
You can read earlier ClearLaw articles on a range of topics, such as:
Daniel is a Senior Associate in the Maddocks Tax & Revenue team.Daniel advises extensively in the following areas:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Daniel worked at a Big Four Chartered Accounting Firm focusing on tax consulting for mergers and acquisitions.
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