Foreign trusts and foreigner duty surcharge

A Matter of Trusts

Taxation in Australia

From 1 July 2015, if the trustee of a foreign trust acquires Victorian residential property, that trustee is liable for a duty surcharge of 3%1 on top of the normal ad valorem duty. This can result in a duty rate of up to 8.5%. This article will examine when a trust will be a foreign trust and what changes can be made to trusts to ensure that they are not foreign trusts under the Duties Act 2000 (Vic). The foreigner duty surcharge can apply to all trusts whether they are fixed trusts, bare trusts, unit trusts, discretionary trusts or hybrid trusts. This article focuses on the application of the foreigner duty surcharge as it applies to discretionary trusts. All references to legislation in this article are to the Duties Act 2000 (Vic).

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