Does your discretionary trust own land?
Does your discretionary trust own land? Beware of foreign person land tax surcharge!!!
All Australian states and territories (except Northern Territory) have introduced foreign person surcharge duty and/or foreign person surcharge land tax which may result in additional land tax and transfer duty for land holdings in discretionary trusts.
The changes to the law in New South Wales (NSW) are the most concerning as the proposed changes stipulate that the trustee of a discretionary trust is taken to be a foreign trustee, unless the trust prevents a foreign person from being a beneficiary of the trust. Most discretionary trust deeds have very wide beneficiary classes and do not restrict foreign persons (e.g. a son or daughter living in another country) from being a beneficiary. In this case regardless of whether the family member lives overseas or not the trust would still be considered to be foreign trust and subject to the additional land tax surcharge.
Whilst the provisions in other Australian states are not as broad as the NSW legislation there are still many instances where a land-owning discretionary trust will be considered foreign and subject to foreign person surcharge tax.
If your family trust owns land or you are considering acquiring land in a family trust we recommend that you have your deed reviewed to ensure you know whether your trust will be subject to foreign person landholder tax. There are options to review and have the family trust deed amended in these circumstances however careful consideration needs to be given to ensure family members are not specifically excluded and unable to benefit as a result of being resident in another country.