Action needed on discretionary trusts

Legislative changes mean a land tax surcharge of 0.75 per cent on residential land in NSW applies from the 2017 land tax year to any trust that may have “foreign persons” listed as a beneficiary.

The common trust deed definition of beneficiaries makes it likely many deeds will include a foreign person as a potential beneficiary. 

The fact that they would never receive any actual benefit from the trust is irrelevant.

If there is at least one possible foreign person under the definition of beneficiaries, the legislation deems that person to have a 100 per cent interest in the income and property of the trust.

 If the property consists of residential land the surcharge will apply.

If you have an existing trust that holds residential property, your trust deed will need to be reviewed and amended, and exemption sought if needed.