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“Foreign persons” who own residential land in NSW must pay a surcharge of 0.75% from the 2017 land tax year onwards. This duty is in addition to the usual land tax liability. For purchasers, they will pay a further 4% of the purchase price of the property in surcharge duty in addition to normal stamp duty.

Most discretionary trusts are primarily intended to benefit Australian resident beneficiaries.  However for asset protection purposes most trusts have a very wide class of beneficiaries and no one beneficiary can claim they have a right to the assets or capital of the trust.

Due to the wide definition of the class of beneficiaries, and in today’s global age, it is very possible that within the extended definition of beneficiaries in your trust deed you will have a beneficiary who is not an Australian or New Zealand citizen (ie a foreign person) who could receive distributions from your trust. The fact that a foreign person may not ever receive any actual benefit from the trust is irrelevant.

If there is at least one possible foreign person under the definition of beneficiaries then the relevant legislation deems that person to have a 100% beneficial interest in the income and property of the trust and if the property consists of residential land the surcharge will then apply.

This surcharge will also apply where the residential landholder is a unit trust and one or more of the unit holdings are owned by a discretionary trust with possible foreign persons in their definition of beneficiaries.


A standard discretionary trust deed is likely to be classed as a “foreign trust” and subject to these surcharges.

The NSW Office of State Revenue (“OSR”) may now grant a retrospective exemption from these surcharges if the trust deed is amended within six months and the Commissioner is satisfied the trustee is not involved in a scheme or arrangement for the evasion or avoidance of these taxes.


If you have an existing trust that holds residential property your trust deed will need to be reviewed and amended and seek the exemption if needed. You should be aware that the trust deed amendment required to achieve the desired result is not as simple as deleting foreign resident beneficiaries owing to the legislation’s complex aggregation and tracing rules.

To many people’s minds a discretionary trust deed is not a publicly available document and people may be of the view that the OSR may not be able to find out whether the discretionary trust is a foreign person.  We are advised the OSR is actively investigating compliance with these surcharges as part of its 2016-2017 Compliance Program and may exchange information with the Australian Taxation Office as part of this program.


The variation to the law imposing the surcharge gives trustees the power to amend trust deeds to remove the power to make distributions to foreign persons with retrospective effect from the date of the amendment of the trust deed back to 21 June 2016.

At this point in time the variation has been expressed to be in force until the legislation is amended.   We would strongly recommend amending your deed whilst able to take advantage of the effect of the provisions allowing for the trust deed amendments to apply retrospectively.

If you have an existing trust please contact our office without delay to have your trust reviewed and amended if required.


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