Discretionary trust amendment - exclusion of foreign beneficiaries

Discretionary trust amendment - exclusion of foreign beneficiaries


$330 - SUPERCentral deed

$440 - non-SUPERCentral deed

The State Revenue Legislation Further Amendment Act 2020 (NSW) received royal assent on 24 June 2020 and amends the Land Tax Act 1956 (NSW), Land Tax Management Act 1956 (NSW) and the Duties Act 1997 (NSW) to deem a discretionary trust as ‘foreign’ for the purposes of surcharge land tax and surcharge duty unless the trust prevents any foreign person from being a potential beneficiary of the trust (i.e. by irrevocably amending its trust deed).

For these purposes, a 'foreign person' includes:

  • an individual who is not ordinarily resident in Australia (in this regard, an Australian citizen is considered to be ordinarily resident in Australia even if they live overseas); and
  • companies and trusts in which a foreign individual holds a substantial interest, or in which two or more persons, each of whom is an individual who is not ordinarily resident in Australia, hold an aggregate substantial interest.

This applies to discretionary trusts if any beneficiaries, or even any potential beneficiaries, meets the definition of a foreign person (and even if none of the beneficiaries who actually receive distributions from the trust are foreign persons).

The amendments could apply retrospectively to levy surcharge to previous transactions and/or land tax assessments prior to commencement of the law unless the terms of the trust are amended before the 31/12/20 deadline. 

There can also be consequences relating to capital gains tax if extreme care is not taken in that a variation of the trust deed can be seen as a resettlement of the trust. As such, we are able to assist with the careful variation of the discretionary trust to best suit you.

Townsends Business and Corporate Lawyers can prepare the necessary documents to make the necessary amendment, whether we prepared the current trust deed or not.

If the current trust deed was not prepared by our law firm, they will review the current trust deed of the Fund to ensure that variation is prepared in compliance with the current rules of the Trust. Our documents package includes all the necessary documents to give you the peace of mind of knowing that the variation was validly effected and recorded.

For further information, please call our SUPERCentral on 02 8296 6266 or email info@supercentral.com.au