Time is running out! Amend your discretionary trust deed before 31 December 2020 – NSW foreign duty and land tax surcharges

Time is running out! Amend your discretionary trust deed before 31 December 2020 – NSW foreign duty and land tax surcharges

17 November 2020 Authored by: Jodie Robinson   |   Topics: Professional advisers, Tax and revenue, Tax disputes

Discretionary trusts that own ‘residential land’ in New South Wales or hold an ownership interest in a company or unit trust that owns residential land in New South Wales must amend their trust deeds before 31 December 2020 to exclude foreign persons as beneficiaries, otherwise foreign land tax and duty surcharges may apply.

New South Wales now deems discretionary trusts to be ‘foreign persons’, unless the trust deed is amended before midnight on 31 December 2020 to:

  • exclude all foreign persons as eligible beneficiaries
  • prevent any amendment to the exclusion of foreign persons as beneficiaries, so that the exclusion is permanent and irrevocable.

This is the case even if none of the eligible beneficiaries of a discretionary trust are foreign persons.

Why does this matter?

If a discretionary trust is deemed a ‘foreign person’, surcharge duty of 8% and surcharge land tax of 2% will be payable on any residential land in New South Wales acquired or owned by the trust since the surcharges were introduced in 2016. This can also be the case where the discretionary trust is a shareholder or unitholder in a company or unit trust that owns the residential land.

Read our previous article here for more information.

What should you do?

  • Arrange for the trust deeds of any discretionary trusts that own residential land in New South Wales or hold an interest in a company or unit trust that owns residential land to be amended, where necessary and appropriate, to satisfy the ‘foreign person’ exclusion requirements under these recent changes by New South Wales Parliament. This is the case even if the trust deed previously satisfied the New South Wales foreign beneficiary requirements.
  • Ensure any trust deed amendments are signed as soon as possible to avoid missing the 31 December 2020 deadline.
  • Submit the trust deed and all variations to Revenue NSW for confirmation that the trust is not a ‘foreign person’.

Cooper Grace Ward can amend a discretionary trust deed to satisfy the ‘foreign person’ exclusion requirements for $440 including GST. Please complete the application form and send it as soon as possible to applications@cgw.com.au together with a copy of the trust deed and all variation and change of trustee deeds.

If you have any questions about the surcharge provisions or amending your trust deed, please contact a member of our team.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.