NSW Duty and Land Tax Surcharges for Trusts

16 December 2019

If you own real property in New South Wales through a discretionary trust, then the terms of your trust deed will need to be urgently reviewed prior to 31 December 2019 to determine if in fact your trust is deemed to be a ‘foreign trust’.  

Due to the recent State Revenue Legislation Further Amendment Bill 2019 (NSW), the amnesty period for amending trust deeds has been set at 31 December 2019.  Up until now Revenue NSW has been lenient in allowing trust deed amendments to rectify the “foreign trust” issue. 

But if this bill passes, then a trustee of a discretionary trust will be deemed to be a “foreign trustee” unless the trust deed prevents (or is amended to prevent) foreign persons from being beneficiaries.  The majority of standard discretionary trusts are likely to be classified as ‘foreign trusts’ for the purpose of surcharge land tax and surcharge purchaser duty in New South Wales.

Trustees of ‘foreign trusts’ who own property in New South Wales have until 31 December 2019 to amend their trust deeds.  

The consequence of being deemed a ‘foreign trust’ is that you will pay:

  • surcharge land tax (currently 2%) in addition to land tax payable for New South Wales residential land owned by the trust; and 
  • surcharge purchaser duty (currently 8%) in addition to duty payable in connection with New South Wales residential land purchased by the trust.

It is clear that it is not good enough to simply amend the trust deed to specifically exclude any potential foreign beneficiary.  The exclusion of foreign beneficiaries must in fact be irrevocable.

So even if you have recently amended your trust deed to exclude foreign beneficiaries, you will not be in a position to obtain the benefit of the Revenue NSW ruling unless the exclusion was drafted to be irrevocable.

Should you have any concerns with your discretionary trust deed, please contact Brad Clark, Partner, who will be happy to assist.

Brad Clark, Partner
(07) 3307 4527
bclark@shandtaylor.com.au
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