The State Revenue Office (SRO) have announced that its current “practical approach” in relation to whether trustees of discretionary trusts trigger the foreign duty surcharge will cease from 1 March 2020.

The foreign duty surcharge (currently, an additional duty at the rate of 8%) applies where the trustees of foreign trusts acquire residential property or property which the trustee intends to develop into residential property. A discretionary trust will be a foreign trust if more than 50% of the capital of the trust can be distributed to a foreign person, foreign company or trustee of a foreign trust (or their associates). Given the wide classes of beneficiaries in a typical discretionary trust, many discretionary trusts will be foreign trusts.

For any contracts signed, or nominations made, from 1 March 2020 by trustees of discretionary trusts, unless the deed contains an appropriate foreign beneficiary exclusion clause, then the trust will be a foreign trust and the foreign trust duty surcharge will be triggered.

It is, therefore, important that, going forward, trustees of discretionary trusts review their deed prior to acquiring residential property to ensure it contains an appropriate foreign beneficiary exclusion clause, and, if it doesn’t, that the deed be amended prior to settlement.

To discuss further or for more information please contact:

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E: pbroderick@sladen.com.au

Denise Tan
Senior Associate
T +61 3 9611 0160 | M +61 438 714 965
E: dtan@sladen.com.au

Laura Spencer
Senior Associate
T +61 3 9611 0110
lspencer@sladen.com.au