If the trustee of your discretionary trust owns residential land in New South Wales and ‘foreign persons’ are not excluded as beneficiaries of the trust, then surcharge purchaser duty (8%) and surcharge land tax (2%) will be payable on residential land in New South Wales.
Under the State Revenue Further Amendment Bill 2019 (NSW), the terms of the discretionary trust may be amended to exclude ‘foreign persons’ prior to 31 December 2019 (provided the terms of the trust allow for such an amendment). Such an amendment will prevent surcharge purchaser duty and surcharge land tax from being inadvertently applied to the residential land held in New South Wales. Further, trustees that may have inadvertently incurred purchaser duty and/or surcharge land tax may receive an exemption or refund if the trust deed is amended to exclude ‘foreign persons’.
Revenue New South Wales has acknowledged that the Bill will not be passed in 2019 and “the Government intends to extend this deadline to a later date in 2020. However, trustees are encouraged to amend their deeds by midnight 31 December 2019, if possible, to avoid incurring a land tax surcharge liability and having to apply for an exemption or refund.”
We recommend the following:
- Immediately reviewing all discretionary trust deeds where the trustee owns residential land in New South Wales, or interests in companies or unit trusts that own such land in order to determine whether they require an amendment to exclude ‘foreign persons’;
- Where trustees have paid surcharge purchaser duty and/or surcharge land tax on the basis that a beneficiary of the discretionary trust is a ‘foreign person’ and has thereafter amended the trust deed to exclude ‘foreign persons’, the trustee should apply for a refund from Revenue NSW; and
- Any discretionary trust that owns residential land in New South Wales since July 2016 which may include a ‘foreign person’ as a beneficiary but has not paid surcharge purchaser duty and/or surcharge land tax should consider disclosing this to Revenue NSW on or before 31 January 2020 as part of their amnesty.