The State Revenue Legislation Further Amendment Bill 2019 was introduced to NSW Legislative Assembly on Tuesday 22 October 2019.
Contained within the Bill are provisions regarding the liability of foreign trustees of discretionary trusts for foreign surcharges. The provisions of the Bill make it clear that a trustee of a discretionary trust is taken to be a foreign trustee if the terms of the trust do not explicitly prevent a foreign person from being a beneficiary. In this case the trustee will be liable for surcharge purchaser duty on the transfer of land as well as for land tax purposes.
Importantly, to not fall within the definition of a foreign trustee, the terms of the trust deed must not only prevent a foreign person from being a beneficiary under the trust but such an exclusion must also be irrevocable.
Transitional clauses have been included which provide for exemptions and refunds when discretionary trusts are amended before the end of 2019. The transitional provisions also have retrospective effect to the commencement of surcharge purchaser duty on 21 June 2016. As a result, trustees who incurred a duty liability prior to the commencement of this bill will have an opportunity to obtain relief.
There will also be a flow on effect to discretionary testamentary trusts. The trustee in these circumstances will generally not have the legal capacity to amend the deed after the deceased has passed away. Transitional clauses are intended to be included to provide that where an individual passes away before, or within two years after, the commencement of the new provisions, and provided they were not a foreign person at death, the trustee of a discretionary trust created pursuant to their will, will not be a foreign trustee, even though there is no clause specifically excluding this in the trust’s deed.
It may therefore be an opportune time for many individuals to revisit their wills to ensure discretionary testamentary trusts created pursuant to their will are not be deemed to be foreign trusts.
If you have any questions in relation to the above or would like assistance in amending your trust’s deed or your will so as not to inadvertently deem the trustee to be a foreign trustee for duties and land tax surcharge purposes, contact our specialist team:
Laura Spencer
Senior Associate
T +61 3 9611 0110
lspencer@sladen.com.au
Daniel Smedley
Principal | Accredited Specialist in Tax Law
M +61 411 319 327| T +61 3 9611 0105
E: dsmedley@sladen.com.au
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E: pbroderick@sladen.com.au
