From 1 January 2021, if a trust owns or purchases residential property in New South Wales, the trust may be subject to additional stamp duty and land tax unless the trust deed is amended before 31 December 2020.
The State Revenue Legislation Further Amendment Act 2020 (NSW) will introduce changes to the way discretionary trusts (and some unit trusts) are charged for land tax and purchaser duty from 1 January 2021.
What has changed?
For the last several years, most states have charged land tax and stamp duty surcharges to foreign purchasers on residential property. These surcharges have also applied to trusts and companies when it is deemed that a foreign person holds a substantial interest.
However, from 1 January 2021, New South Wales law will deem any discretionary trust to be a foreign trust unless the trust deed specifically prevents foreign beneficiaries. In particular, the exclusion of foreign beneficiaries must be irrevocable under the deed.
These new rules can also apply to:
- unit trusts that include discretionary powers (i.e. hybrid trusts);
- testamentary trusts created by wills signed after 31 December 2020; and
- discretionary trusts that hold interests in land-rich unit trusts or companies.
The changes in New South Wales follow similar rules introduced in Victoria in March 2020, whereby any discretionary trust that did not specifically exclude foreign beneficiaries would be considered a foreign trust and therefore subject to the surcharge. To read our previous update in relation to these changes in Victoria, click here.
Property owners should also beware that the term ‘residential land’ is interpreted broadly and can include mixed-use land and vacant residential land.
What you need to do before 31 December 2020
If your trust holds property or is looking to acquire property in New South Wales, you will need to update your trust deed now to ensure that you are not liable for the surcharge in the new year.
For information on the changes, or to have your trust deed updated, please contact a member of our Estate Group below.
Principal Lawyer and
Head of Estate Group
D +61 3 8600 8885
Principal Lawyer and
Accredited Wills and Estates Specialist
D +61 3 8600 0710
D +61 3 8600 8817
D +61 3 8600 8806
D +61 3 8600 8826
Note: This update is a guide only and is not intended to constitute legal advice.