Are you a trustee of a discretionary trust? Do you hold residential land in New South Wales or intend to hold it? Then you need to read our latest District Reporter article on changes to legislation!
If you are a trustee of a discretionary trust and you hold (or intend to hold) residential land in New South Wales in your capacity as trustee of that trust then you need to read this.
On October 22, 2019, the State Revenue Legislation Further Amendment Bill 2019 was introduced to the NSW Parliament. If this Bill is passed, then a family trust is effectively deemed to be a “foreign person” unless its trust deed prevents (or is amended to prevent) foreign persons from being beneficiaries of the trust by December 31, 2019.
In New South Wales, surcharge purchaser duty (8%) and surcharge land tax (2%) is payable on residential land by foreign persons.
A trustee of a family trust is deemed to be a “foreign person” if the terms of the trust do not specifically prevent a foreign person from being a beneficiary of that trust. If the terms of the discretionary trust prevent a foreign person from being a beneficiary then the trustee will not be a “foreign trustee” for the purposes of surcharge purchaser duty and surcharge land tax.
A trustee who is deemed to be a “foreign trustee” will pay and additional 2% in land tax in New South Wales from the 2018 land tax year onwards and could end up paying transfer duty of up to 15% in New South Wales on the dutiable value of any residential land purchased in New South Wales.
Under the State Revenue Further Amendment Bill 2019 (NSW) an exemption from, and refunds of, surcharge purchaser duty and surcharge land tax payable in respect of residential land by the trustee of a discretionary trust will be given if:
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the terms of the trust deed prevent a foreign person from being a beneficiary of the trust (no foreign beneficiary requirement); and
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the clause preventing a foreign person becoming a beneficiary cannot be amended to allow a foreign person to be a beneficiary at a later time (no amendment requirement).
However in order to obtain this exemption you must amend the terms of the discretionary trust before midnight on December 31, 2019.
Please contact us if you wish to review your discretionary trust deeds and amend it to satisfy the no foreign beneficiary requirement and no amendment requirement.
