Time is running out to amend discretionary trusts

For Business | For Individuals
December 4, 2019

You may already be aware that the State Revenue Further Amendment Bill 2019 (NSW) was introduced before the NSW parliament on October 22 of this year.  This bill seeks to amend legislation relating to duties and land tax.  This might leave some wondering exactly what does this have to do with discretionary trusts? Well, it could be more than you realise, even if you are located outside of NSW…  

Taxpayers now have until 31 December 2019 to change their trust deeds such that they are not inadvertently deemed to be “foreign persons”. The changes make it clear that all discretionary trusts are “foreign persons” for duties and land tax surcharge purposes unless the trust deed prevents a foreign person from being a potential beneficiary of the trust.  

While this was already the practice of the NSW government, the government has been quite lenient historically in allowing taxpayers to change their trust deeds until now. 

This directly affects trusts which have acquired residential land since 21 June 2016 or have held residential land for a land tax year from 2017 or later. 

Surcharges can more than double the tax otherwise payable and is a material cost to buying or holding residential land in NSW. 

Here at Nexis we recommend an immediate review of all trust deeds for discretionary trusts that hold, or intend to hold, residential land in NSW.

If you would like more information on the State Revenue Further Amendment Bill 2019 (NSW) or have concerns in relation to the approaching deadline for discretionary trusts, please contact one of our team on 02 6264 8000.   

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