Emerging Constitutional Issues in State Land‑Tax Surcharges
Updated: Jan 25
The High Court of Australia in 2025 delivered a joint judgment in Stott v The Commonwealth of Australia (M60/2024) and G Global 120E T2 Pty Ltd v Commissioner of State Revenue (B48/2024, B49/2024, B50/2024) addressing the constitutionality of state-imposed land tax surcharges on foreign or absentee owners.
background
The dispute arose from the interaction of Victorian and Queensland land tax surcharge regimes with Australia’s obligations under international tax treaties, and the Commonwealth’s legislative response through the Treasury Laws Amendment (Foreign Investment) Act 2024 (Cth).
Francis Stott, a New Zealand citizen, owned land in Victoria and was subject to higher “absentee owner” land tax under the Land Tax Act 2005 (Vic). Similarly, the G Global appellants were German-owned trust companies holding land in Queensland subject to foreign-owner surcharge provisions. In both matters, the plaintiffs challenged the validity of state surcharge laws as inconsistent with Australia’s treaty obligations and argued that retrospective Commonwealth intervention may amount to an acquisition of property not on just terms.
Assessment of law
At the point the assessment notice arrived, the issue was not abstract or theoretical. It was arithmetic.
The land was the same. The use was the same. The local services funded by the tax were the same. Yet the amount payable was materially higher – not because of how the land was held or what it was used for, but because of who owned it, and where that owner was from.
For foreign owners of Australian land in jurisdictions such as Queensland and Victoria, surcharge land tax and duty regimes were expressly designed to do exactly that: impose higher rates on non-residents and foreign-controlled entities. The policy objective was transparent. The legal consequence, however, was less so.
What made the position different for some foreign owners was not domestic law, but international law
as incorporated into Australian statute. For certain countries, Australia had entered into bilateral tax treaties that included non-discrimination obligations. Those treaties were not aspirational. They were given domestic legal force through the International Tax Agreements Act 1953 (Cth), placing them on the same statutory footing as other Commonwealth tax laws.
Under those treaties, nationals and enterprises of the contracting state were not to be subjected to taxation in Australia that was more burdensome than that imposed on Australian nationals or domestically owned enterprises in comparable circumstances. In practical terms, the treaties appeared to promise protection against being taxed more heavily simply because ownership crossed a border.
For a German-owned trust holding land in Queensland, or a New Zealand citizen owning land in Victoria, the surcharge regimes raised an immediate question. If Australian law itself prohibited discriminatory taxation under binding international agreements, why was a higher tax being levied at all?
The objection was not to taxation as such. It was to differential treatment. The foreign owner was not seeking a concession or exemption, but parity – the same tax outcome that would apply if the owner were Australian.
Procedural History
The matters were referred to the High Court following preliminary questions in lower jurisdictions regarding:
The operation of state land tax surcharges against non-resident owners.
The constitutional effect of Commonwealth legislation retrospectively validating those surcharges.
The application of section 51(xxxi) regarding just terms acquisition in the context of retrospective legislative measures.
The scope of the external affairs power under section 51(xxix) in supporting federal intervention where international obligations intersect with state law.
Both cases were heard jointly in May 2025, and a single judgment was delivered on 15 October 2025, consolidating the issues and providing uniform guidance on state surcharge regimes and Commonwealth legislative powers.
Legal Considerations
Statutory Inconsistency and Section 109
The High Court examined whether the Victorian and Queensland surcharge provisions conflicted with Commonwealth law implementing Australia’s double-taxation treaties with New Zealand and Germany. Section 5(1) of the International Tax Agreements Act 1953 (Cth) gives effect to treaty obligations prohibiting discriminatory taxation against nationals of contracting states.
The Court confirmed that, prior to the 2024 Commonwealth amendment, the surcharge provisions were inoperative to the extent of inconsistency under section 109 of the Constitution.
The case highlights the technical application of section 109 in circumstances where state taxation law produces a measure that conflicts with treaty-derived federal law. It clarifies that treaty obligations incorporated domestically can render state laws inoperative, even if the laws would otherwise be validly enacted under state constitutions and statutes.
External Affairs Power
The Commonwealth enacted section 5(3) of the International Tax Agreements Act via the 2024 amendment to limit treaty-derived non-discrimination obligations to Commonwealth taxes, thereby validating state surcharges retrospectively. The High Court held that this legislative action was a valid exercise of the external affairs power under section 51(xxix) of the Constitution.
The Court confirmed that Parliament can legislate to reconcile domestic law with international obligations, even retroactively, provided the law has a genuine nexus to Australia’s external affairs.
This ruling underscores the technical breadth of the external affairs power, confirming that it can support retrospective legislative validation of previously inoperative state laws, provided the law is directed toward implementing or giving effect to international obligations.
Validity
The plaintiffs argued that retrospective validation extinguishing potential restitution claims constituted an acquisition of property requiring compensation under section 51(xxxi). The Court rejected this contention, concluding that no acquisition occurred because the Commonwealth law merely validated pre-existing statutory liabilities; it did not confer a proprietary benefit to the Commonwealth or another party in exchange for property.
This aspect of the decision clarifies the narrow circumstances under which retrospective legislation can engage the just terms requirement, reinforcing the principle that statutory liability validation does not inherently amount to property acquisition.
What the Court Held
State surcharges inoperative prior to 2024 amendment: Victorian and Queensland absentee/foreign-owner surcharges conflicted with federal treaty law and were inoperative to the extent of that inconsistency.
Commonwealth validation constitutional: Section 5(3) of the ITAA, inserted by the Treasury Laws Amendment (Foreign Investment) Act 2024 (Cth), was upheld as a valid exercise of the external affairs power and effective to revive the state surcharges retroactively from 1 January 2018.
No acquisition on unjust terms: The retrospective validation of surcharge liabilities did not constitute an acquisition of property requiring compensation.
Outcome
The High Court’s joint decision confirmed the enforceability of state land tax surcharges for foreign or absentee owners. It clarified the interplay between:
Section 109 inconsistency principles,
Treaty-derived Commonwealth law,
The external affairs power, and
Section 51(xxxi) just terms acquisition constraints.
The decision ensures that retroactive legislative measures aimed at resolving treaty conflicts are constitutionally permissible under defined conditions.
Professional Significance
Stott and G Global provide clear precedent on:
The technical operation of section 109 in the context of treaty obligations.
The valid use of the external affairs power to retrospectively validate state legislation.
The narrow engagement of section 51(xxxi) in cases of statutory liability validation.
Risk assessment and advisory for non-resident landowners and trustees regarding foreign land tax surcharges.
Strategic planning for states and the Commonwealth when drafting legislation impacting treaty-derived rights.
The decision also reinforces the principle that Commonwealth intervention can lawfully rectify inconsistency between state taxation schemes and international obligations, even retrospectively, without engaging compensatory requirements under the Constitution. Legal advisers must now integrate treaty, constitutional, and statutory risk analysis when assessing foreign ownership exposure to state land taxes.
Conclusion
Stott v The Commonwealth of Australia and G Global 120E T2 Pty Ltd v Commissioner of State Revenue establish a highly technical constitutional precedent. They confirm the Commonwealth’s capacity to preserve state revenue regimes while maintaining constitutional compliance with international obligations and respecting just-terms property protections.
The judgment provides a structured roadmap for states, non-resident landowners, trustees, and legal advisers navigating the intersection of state taxation, treaty obligations, and federal constitutional powers. The case marks a definitive clarification of legislative authority and judicial scrutiny in cross-jurisdictional land taxation in Australia.