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Discretionary Trusts and Foreign Persons: To Exclude or Not Exclude That Is The Question

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 HanSelwyn 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

Discretionary Trust Circumstance

Action

Does it own residential property in NSW

Is it purchasing NSW residential property in 2020

Foreign Persons Variations

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)

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)

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

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

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 Herehttps://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.

 

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