Important changes to Discretionary Trusts that own Residential Land in NSW

On 24 June 2020, the State Revenue Legislation Further Amendment Act 2020 (NSW) received Royal Assent. It provides that a trustee of a discretionary trust which owns residential property in NSW is taken to be a foreign person for foreign surcharges purposes, if the trust does not irrevocably prevent a foreign person from being a beneficiary of the trust.

Until 31 December 2020, trustees of discretionary trusts can amend their trust deeds to include a provision preventing a foreign person from being a beneficiary. The provision must be irrevocable in order for the past and future surcharges not to apply.

From 1 January 2021, trustees of all discretionary trusts (including testamentary trusts) will be subject to surcharges unless the trust deed contains an irrevocable provision.

If you have a family trust or other discretionary trust in your financial structure which owns, whether directly or indirectly, any residential land in NSW you should contact your tax accountant as soon as possible to assess whether any changes are required to your Trust Deed prior to 31 December 2020. 

This is a complex area and requires specialist advice from a professional adviser who is familiar with the legislation and your specific financial structure.  Pearson Emerson is not a tax specialist and cannot provide specific advice or amendments in respect of your Trust Deed.  If you require a referral to a specialist, we would be happy to refer you to a suitable advisor.