In 2016, NSW implemented new regulations that hold “foreign persons” accountable for surcharge purchase duty, including an additional 8% stamp duty, when acquiring residential property in Sydney. Additionally, any residential property owned in Sydney as of December 31st each year is subject to surcharge land tax, amounting to an additional 2% in land tax. Consult professional accountants in Sydney if you need assistance understanding or navigating these regulations.
A discretionary trust can be a “foreign person” just by having a potential beneficiary who is a foreign person. Potential beneficiaries of family trusts are generally very broadly defined in trust deeds, so, commonly, there are one or more potential foreign beneficiaries. Where this is the case, the trustee will be liable for a foreign purchaser surcharge if the trust acquires residential property in NSW and a foreign person land tax surcharge on residential property it holds in NSW.
We’ve discussed land tax surcharge in previous newsletters, so many family trust deeds will have already been amended to expressly exclude foreign persons from benefiting.
Revenue NSW released a revenue ruling on 13 September 2017, however, that clarified the need for such an amendment to be made on an irrevocable basis. A subsequent practise note issued in July 2018 provides that where an amendment to a trust deed was made before 19 September 2017, the amendment would be accepted without the irrevocable clause for dutiable transactions that occur on or before 31 December 2018, and for surcharge land tax for the 2018 land tax year.
The State Revenue Legislation Further Amendment Bill 2019 (NSW) proposes to give legislative effect to the revenue ruling essentially. The Bill allows for exemptions and refunds of surcharge purchaser duty and surcharge land tax, provided that the trust deed is amended before midnight on 31 December 2019.
If you have residential properties held through a discretionary trust and either:
- have not had the deed amended to prevent a foreign person from being a beneficiary, or
- your deed was amended for this purpose but not on an irrevocable basis,
You should urgently seek advice to implement any amendment no later than 31 December 2019.
If you have concerns about your specific circumstances, please contact us to discuss them as soon as possible.
Kreston Stanley Williamson Team
*Correct as of December 2019
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.