ARTICLE
14 November 2020

Tax risk for NSW discretionary trusts

WT
Watkins Tapsell

Contributor

Watkins Tapsell is a client-focused law firm with over 50 years of experience. They provide comprehensive legal support to families, individuals, small businesses, and larger companies. With six Partners and a dedicated team, they prioritize exceeding client expectations by anticipating legal changes and adapting their services to meet evolving needs. Building long-term relationships is a core value for Watkins Tapsell.
Recent Duties Act changes impose surcharges on discretionary trusts, if foreign persons are potential beneficiaries.
Australia Corporate/Commercial Law

Recent Changes to the Duties Act impose stamp duty and land tax surcharges on Discretionary Trusts, including Testamentary Discretionary Trusts, where there is a potential for a beneficiary to be a "Foreign Person" (for the purposes of the Duties Act).

Even where there are no actual "Foreign Persons" as beneficiaries of the trust, if there is a potential for a foreign person to become a beneficiary in the future, the Trust will now be liable for surcharge duty and surcharge land tax on any land held or purchased by the Trust.

Amending a Trust

There is a grace period for current Trusts to be amended to irrevocably exclude foreign persons. If a Trust is amended on or before 31 December 2020, the surcharges may be avoided. If the Trust is not amended, then surcharge duty and surcharge land tax will apply retrospectively for property transferred or held by the trust since the surcharge was introduced. This could mean significant back payments for stamp duty and land tax may become payable by Trusts if their Trust Deeds are not amended.

So where does this leave you?

If you own property in a Discretionary Trust, you MUST have your trust deed reviewed. If amendments are needed, they must be made on or before 31 December 2020.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More