Foreign beneficiaries rulings for discretionary trusts
Reminder, it’s time to review your trust deed
If you haven’t already done so, please review your trust deed now to determine whether it needs to be updated.
With changes in rulings around foreign beneficiaries in discretionary trusts owning residential property happening for Victoria at the beginning of this year, and NSW at the end of this year, we are recommending a review of your trust deed to ensure it is up to date and reflects the operation of the trust.
Why? Recent changes in Victoria and New South Wales mean that it may be necessary to amend discretionary trust deeds to expressly exclude foreign beneficiaries regardless of whether foreign persons are intended to be potential beneficiaries or not. Otherwise, stamp duty and land tax surcharges may apply on property held by the trust in those states.
For property in NSW, these changes have a retrospective effect. The stamp duty surcharge applies to relevant transactions from 21 June 2016 and the land tax surcharge applies from the 2017 and subsequent land tax years. The good news is there is retrospective relief if the terms of the trust are amended BEFORE 31 December 2020.
For property in Victoria, the changes apply to all purchases of property after 1 March 2020.
Other factors to consider in regards to the construct of your trust deed include:
- any limitations that may impact business operations or investment in certain asset types
- succession planning and appointment of new appointers
- allocation of income and types of income to beneficiaries
To discuss your trust deed(s) and find out how we can help in regards to a review, please contact one of our friendly team here at Salisburys on 02 6041 3104.