On 24 June 2020, the State Revenue Legislation Further Amendment Act 2020 came into effect, which made amendments to the Duties Act 1997, the Land Tax Act 1956, and the Land Tax Management Act 1956.
The amendments are meant to address what is perceived to be a loophole that has been long exploited by foreign purchasers seeking to avoid Surcharge Purchase Duty and Surcharge Land Tax Surcharge. They do this by purchasing the property using a Discretionary Trust.
Essentially, the amendments now state that the Trustee of a Discretionary Trust will now considered to be a foreign trustee and will be liable for Surcharge Purchaser Duty unless the terms of the trust deed prevents a foreign person from being a beneficiary of the trust. Amendments with similar effect are applied with respect to Surcharge Land Tax Surcharge.
The amendments are also partly retrospective. They apply to all dutiable transactions from 21 June 2016. Surcharge Land Tax Surcharge will apply from 2017 onwards.
The amendments allow Trustees up to midnight on 31 December 2020 to make amendments to their trust deeds. The amendments must be irrevocable – that is – they cannot be changed.
If you have a discretionary trust that owns or will own property in New South Wales, you must urgently review your trust deed to ensure that it complies with the rules.
Written by Kenneth Ti.