Discretionary Trusts and Foreign Persons: To Exclude or Not Exclude That Is The Question
Published on November 27, 2020 by Selwyn Black and Yue Lucy Han
You or your clients (if you are an accountant) may have received letters from Revenue NSW (or other State and Territory agencies) notifying you about the impact of surcharge land tax to be paid by foreign persons who own land. In NSW, this currently only applies to residential land (as defined).
Discretionary Trust: Overview of the situation in NSW
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Discretionary Trust Circumstance |
Action |
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Does it own residential property in NSW |
Is it purchasing NSW residential property in 2020 |
Foreign Persons Variations |
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Yes |
Does not matter whether intending to purchase or not |
Trust Deed amended prior to 24 June 2020 | The Trustee should promptly apply for a refund of surcharge purchaser duty (if paid) and a refund of surcharge land tax (if paid) |
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Yes |
Does not matter whether intending to purchase or not |
Trust Deed amended between 24 June 2020 and 31 December 2020 | The Trustee should promptly apply for a refund of surcharge purchaser duty (if paid) and a refund of surcharge land tax (if paid) |
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Yes |
No |
Not yet amended |
The Trust Deed should be amended to irrevocably exclude Foreign Persons by 31 December 2020 to avoid 2021 land tax surcharge, but be aware the exclusion is irrevocable so consider if that is an issue |
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No |
Yes |
Not yet amended |
The Trust Deed should be amended to irrevocably exclude Foreign Persons before the contract exchange date, but be aware the exclusion is irrevocable so consider if that is an issue |
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No |
No |
Not yet amended |
Unless the Trustee of the Discretionary Trust has an indirect interest (as shareholder/unitholder in company / unit trust holding NSW residential land), relax – but check the position for other states and territories if land held / to be bought there. |
NOTE 1: In NSW for Testamentary trusts arising before 31 December 2020, the testamentary trusts do not have to irrevocably exclude Foreign Persons.
NOTE 2: With some differences there are similar laws in many Australian states and territories
NOTE 3: There may also be an issue where the trustee for a discretionary trust holds an indirect interest in land such as via a unit trust or company
Carroll & O’Dea Lawyers’ Solution for Discretionary Trusts
To help meet the deadline, Carroll & O’Dea Business has developed an online request platform for trust deeds that meet the conditions to create customised trust deed variations for a fixed price.
Give us a call if you have any questions about the Foreign Persons Trust variations, or if you would like to use our online request platform.
Access Here: https://app.checkbox.ai/pubt/81f9464d-cf8e-4be2-9ba4-6da1d4bab8c9
IMPORTANT NOTE: This is general information prepared to assist the readers but it is no substitute for advice on particular circumstances. You should obtain specific legal advice before making a decision and continuing in these circumstances.
