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Avoid Unnecessary Tax – Update your Family Discretionary Trusts Now before the 31 December 2019 Deadline

 

The New South Wales government has introduced a bill whereby the following will be deemed to be a foreign entity, regardless of whether they have any foreign connection or not:

  • Discretionary trusts
  • Companies where a discretionary trust holds at least 20% of the shares.

This has two significant consequences:-

1. If the trust purchases any residential property in New South Wales, it will pay a surcharge of 8% on top of the normal stamp duty; AND

2. While New South Wales residential property is held by the trust, the trust will pay a  land tax surcharge of 2% per year.

However, these surcharges will not apply if a discretionary trusts’ deed is amended prior to 31 December¬† 2019 to provide that:

1. no distribution can be made to a foreign person; AND

2. any such prohibition cannot be revoked.

The effect of this legislative change will mean that any discretionary trust that purchases or holds residential property in New South Wales will be subject to the surcharges, unless their trusts deed are amended.

Please do not hesitate to contact our office should you have any questions or wish to have your discretionary trust deed reviewed and amended.