Removal of Foreign Purchaser Surcharge Duty for Eligible Build-to-Rent Developments in NSW

From 1 July 2026, the 9% foreign purchaser surcharge duty no longer applies to certain qualifying Build-to-Rent (BtR) and retirement village developments in New South Wales (NSW).

That change comes via the Revenue and Other Legislation Amendment Bill 2026 (NSW) (the Bill), introduced alongside the 2026-27 State Budget. The reforms will remove a significant acquisition cost for eligible developments and further expand the concessions available to the BtR industry.

Where We Have Come From

BtR has long occupied an unusual position within the NSW property tax regime.

The foreign purchaser surcharge was originally introduced to apply to foreign purchasers of residential-related property. However, the surcharge has also captured many institutional investors involved in large scale residential developments, including offshore pension funds, sovereign wealth funds and international investment vehicles. As a result, foreign investors acquiring land for BtR projects have generally been required to pay the 9% surcharge purchaser duty in addition to ordinary transfer duty, land tax and foreign owner land tax surcharges.

The NSW Government has previously introduced measures intended to encourage investment in the section. For example, qualifying BtR developments may already access land tax concessions under sections 9E and 9F of the Land Tax Management Act 1956 (NSW). Certain surcharge purchaser duty exemptions are also separately available to Australian developers that are technically classified as foreign persons because of their ownership structure.

What those concessions did not address was the upfront surcharge purchaser duty payable by the broader pool of institutional investors participating in the BtR and retirement living sectors.

Changes From 1 July 2026

The Bill introduces a new Chapter 2A, Part 3A into the Duties Act 1997 (NSW), setting up two pathways for surcharge purchaser duty relief:

• Section 104ZJC allows a refund of surcharge purchaser duty where the transferred land qualifies for the BtR land tax concession under sections 9E or 9F of the Land Tax Management Act 1956 (NSW), provided the concession continues to apply for a further continuous period of at least five tax years, or the land is transferred to another qualifying party within that five year period.

• Section 104ZJD allows similar relief for an Australian corporation that, after being transferred residential-related property, builds a retirement village of at least 50 dwellings or adds 50 dwellings to an existing one on the land, entitling it to a refund of surcharge purchaser duty, provided it applies within 12 months of construction and first occupation, and no later than 10 years after the transfer.

The Bill also removes surcharge duty from certain transfers of retirement village dwellings back to operators, addressing an outcome that had previously affected some ordinary buy-back arrangements.

Where FIRB approval and endorsement are already in place by settlement, the exemption is intended to apply at the time of transfer rather than requiring purchasers to pay the surcharge and seek a refund afterwards.

For transactions where surcharge purchaser duty has already been paid, a reassessment process will be available. Applications must be lodged via eDuties by a legal representative rather than the standard Electronic Duties Returns system.

What Is Still to Come

The Bill was introduced into the Legislative Assembly on 23 June 2026 and has not yet passed Parliament. Accordingly, the proposed reforms remain subject to amendment before they receive assent.

There are practical questions that will likely require further guidance from Revenue NSW, including:

• how the five-year continuity requirement will be assessed;

• how mixed-use-developments will be treated; and

• the administrative requirements for obtaining exemptions and re-assessments.

Investors and developers should therefore continue to monitor the progress of the legislation and any accompanying Revenue NSW guidance.

What This Means for You

For developers, investors and advisers working in BtR and retirement living sectors, the reforms may warrant a fresh review of existing projects and acquisition strategies.

Parties should consider:

• revisiting projects where surcharge purchaser duty materially affected feasibility;

• ensuring FIRB approvals and endorsements are obtained as early as possible where required;

• reviewing whether previously completed acquisitions may qualify for reassessment; and

• considering the implications of the five-year continuity requirement when structuring ownership and future transactions.

Conclusion

None of these change the underlying commercial reality of BtR. However, the changes remove a significant upfront transaction cost for qualifying projects.

For developers and investors operating in the sector, the concessions may have a material impact on acquisition costs and project feasibility. However, given that the Bill has not yet passed, and further administrative guidance is still expected, any decisions should be made having regard to the final form of the legislation and the applicable eligibility requirement.

If you are involved in a Build-to-Rent, retirement living or large-scale residential development and would like advice on how these proposed reforms may affect your project, please contact our people.

Eollyn Cortes 0478 727 395

Sagang Chung 0431 435 333

Helen Jeon 0457 811 882