Discretionary Trust Deeds – how to avoid new surcharges

Margaret Young

08 Oct 2020

Topics

  • Business services
  • Estate planning

Are you a trustee for a Discretionary Trust that owns or intends to own real estate in New South Wales? If so, you could be deemed to be a foreign trustee and you need to act before 31 December 2020 to ensure you do not incur surcharge stamp duty or are subjected to Land tax surcharges.

Many jurisdictions across Australia have implemented laws to impose duty and land tax surcharges on foreign persons who are beneficiaries of trusts.

In New South Wales, through the implementation of the State Revenue Further Amendment Act 2020 (NSW), the surcharges are now being imposed on foreign trustees. A foreign trustee is in fact, any trustee, unless the trust deed prevents a foreign person from being a beneficiary of the trust. A foreign trustee who purchase real estate will pay surcharge purchaser duty on a transfer of dutiable property and surcharge land tax on the real estate holding.

The only way that a discretionary trust can avoid paying the above surcharges is by amending the trust deed to include the following: –

  1. Preventing a foreign person from being or ever becoming a beneficiary of the Trust; and,
  2. Preventing the trust deed from being amended so as to allow a foreign person from being or ever becoming a beneficiary.

The amendments above must be completed prior to 31 December 2020. If the Trust is not changed, it will be subject to the above surcharges for property held in New South Wales.

The surcharge land tax is 2% and potentially paying up to 15% on purchaser duty surcharges.

If the above is applicable to you and you want to amend your discretionary trust deed before 31 December 2020, please contact the Snedden Hall & Gallop team on 02 6285 8000 or by email.