NSW Property Surcharge on Discretionary Trusts

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Current as of December 2016

We highly recommend reading this article to gain valuable insights tailored explicitly for accountants in Sydney if you are a trustee of a Discretionary Trust, also known as a Family Trust, and you own residential properties in New South Wales as part of your Trust.

The NSW Government has recently changed the definition of “foreign persons” to assess duty and land tax liabilities. If you have a Discretionary Trust, you will likely be caught by this new definition. This is since the typical trust set up in Australia usually contains an extensive class of beneficiaries which covers non-resident beneficiaries (such as grandparents, siblings and cousins living or residing overseas). Therefore, if you have existing Discretionary Trusts with a residential property, we recommend the Trust Deed be reviewed and amended to remove the foreign person (if applicable). Australian citizens are not considered foreign persons unless their Australian citizenship rights have been removed due to some other reasons.

The surcharges are:

  1. Effective from 21 June 2016, any new residential property purchased by a Discretionary Trust with foreign persons will be subjected to an extra 4% duty on the purchase price;
  2. Effective from 31 December 2016 and every 31 December each year as we advance, any Discretionary Trust with residential property is subjected to the foreign person rule and will be liable for an extra 0.75% land tax cost on the unimproved land value of the residential property.

In summary, if you are looking to set up a Discretionary Trust to purchase a residential property or your current Trust holds a residential property in NSW in the Trust, please get in touch with us immediately so we can work to help you save and avoid paying the surcharges.

Similar surcharges are also applicable in other states (i.e. Victoria).

For our clients with Discretionary Trusts that the surcharges may catch, we will contact you directly in the coming months.

If you have any questions, please do not hesitate to contact your Client Manager.

Kreston Stanley Williamson Team

*Correct as of December 2016

Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.

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