You have a discretionary trust.
You have or are about to acquire a residential property.
You need to amend your current trust deed to avoid any liability to pay the NSW State Revenue:
- surcharge purchaser duty and
- surcharge land tax.
Surcharge purchaser duty applies to acquisitions of NSW residential land by foreign persons, and surcharge land tax applies to foreign persons who are owners of residential land in NSW.
These foreign surcharges are payable in addition to any other duty or land tax payable.
Why this affects you:
- Where an interest in a property is acquired directly or indirectly by or held through a discretionary trust, the trustee of the trust may be liable for foreign surcharges if any one of the potential beneficiaries is a foreign person.
- Each beneficiary in a discretionary trust is deemed to have the maximum percentage interest in the income or property over which the trustee may exercise a discretion to distribute
You don’t think you have anyone overseas you will distribute to:
- Unfortunately this arises because a discretionary trust can have potential beneficiaries that are not limited to persons named in the trust instrument.
- Potential beneficiaries are often nominated by class rather than name for a number of reasons, trusts deeds are written to provide this flexibility as it allow things evolve and change in the future.
What you need to do:
- The trust deed must be amended to exclude any foreign beneficiaries and
- The amendment must be irrevocable.
How much will this cost?
- We do not know until the lawyer sees your Trust Deed, estimated $550-$900 (but this needs to be confirmed).
Quick summary:
- Unfortunately you need to do this to protect against potential payment of duty or tax to the NSW Office of State Revenue.
- It should be done before any residential property purchase otherwise it needs to be done urgently.
- Read more here; https://www.revenue.nsw.gov.au/help-centre/resources-library/cpn/cpn004v2
Contact us urgently if you require an amendment or if you would like to discuss.
General Advice warning: the information in this article is general in nature, it is not advice specific to your needs. If you want to act upon the information in this article then you should seek advice from a qualified professional. VJC WM accepts no liability to any party for acting from this information unless they have sought advice in a formal engagement with VJC WM for this purpose.
