Does your discretionary trust exclude foreign beneficiaries?

E-Briefs | Wills and Estates

  • Does your discretionary trust exclude foreign beneficiaries? image

If you have a discretionary trust, you may need to amend its Deed by 31 December 2020 to avoid paying substantial surcharges that apply to foreign persons.


In New South Wales, a ‘surcharge purchaser duty’ applies to purchases of NSW residential land by foreign persons, and ‘surcharge land tax’ applies to foreign persons who own residential land in NSW. These ‘foreign surcharges’ must be paid on top of any other duty or land tax payable if potential beneficiaries of a discretionary trust include foreign persons, where such trust acquires or owns an interest in property in NSW.

‘Potential beneficiaries’ are included in discretionary trusts as a further class of persons who may benefit from the trust property, distributed or applied pursuant to the discretions of the trust (pursuant to s104JA(4) of the Duties Act 1997).

NSW Amendments

The State Revenue Legislation Further Amendment Act 2020 No 14 (NSW) came into force on 24 June 2020, amending the Duties Act 1997, Land Tax Act 1956 and the Land Tax Management Act 1956.

In short, these amendments deem the trustee of a discretionary trust to be a foreign person unless:

the trust expressly prevents a foreign person from being a beneficiary of the trust (including potential beneficiaries); and

the trust provides that the terms in paragraph 1 above are irrevocable (s104JA(3) of the Duties Act 1997).

These changes also apply retrospectively, from when the surcharges were first introduced in 2016.

What does this mean?

Where land is held by or owned through a discretionary trust, a ‘surcharge land tax’ (2% on residential land) and a ‘surcharge purchaser duty’ (8% on transactions of residential land) will apply on top of ordinary applicable tax rates, unless the above amendments are made to the discretionary trust deed before 31 December 2020.

What should you do?

Making these changes can be complicated. If you have a discretionary trust which holds or may acquire an interest in land in NSW, our Corporate and Commercial Team can assist you in making the necessary amendments to avoid paying the above additional surcharges. Feel free to get in touch with us now for more information.
(02) 6279 4335