Surcharge land tax on discretionary trusts

Is surcharge purchaser duty taxable? Are discretionary trusts taxable? What is surcharge land tax? A land tax surcharge of applies to land owned by the trustee of an absentee trust. A discretionary trust will be an absentee trust if it has at least one specified beneficiary who is an absentee person (essentially a foreign person who is absent from Australia).

A specified beneficiary is a named beneficiary in the trust deed. It is likely this exemption will be removed with the passing of the new Bill into law. In New South Wales, surcharge purchaser duty () and surcharge land tax () is payable on residential land by foreign persons.

An absentee trust is a discretionary trust , a unit trust or a fixed trust , which has at least one beneficiary who is an absentee person. The current rates and surcharge liabilities are: for surcharge duty for land tax surcharge These rates apply, without any land tax threshol in addition to the usual duty or land tax which would be payable. One is expecte the other is surprising.

Refunds of previously paid surcharge purchaser duty and land tax can also be applied for, but only if the terms of the trust are amended in. CPN 0on how surcharge purchaser duty and surcharge land tax will be administered for discretionary trusts. An exception to this is if there is a beneficiary that has been nominated as the beneficiary for a particular land.

Victoria first introduced foreign duty and land tax (absentee owner) surcharges on the acquisition of residential lands by foreign purchasers. That is of land value, over and above any other land tax payable. If a discretionary trust has a foreign beneficiary, the trust itself is liable for the surcharge. A discretionary trust is subject to surcharge purchaser duty and surcharge land tax if potential beneficiaries of the trust include ‘foreign persons’.

Where the trust holds an indirect interest in land through interposed entities, liability can also arise. Azlin Lufti explains. Land tax has been around for a long time but the goalposts are regularly changing due largely to the increasing number of foreign property investors in.

A ‘foreign person’ may be an individual, corporate foreign investor or trust structure. Many people own land through a discretionary trust. NSW residential land.

However, discretionary trusts are usually considered to be foreign for land tax. Previously, taxpayers holding land in discretionary trusts were able to avoid the surcharge by not including foreign persons as beneficiaries. Following G01 any discretionary trust in which a potential beneficiary is a foreign person, will be subject to land tax and stamp duty surcharges. The New South Wales Office of State Revenue (OSR) has delivered a ruling which significantly undermines the tax benefits of many discretionary trusts , the Revenue Ruling No. This is in the face of one of the key advantages of a discretionary trust - flexibility.

On the other han the primary focus of foreign surcharges is to impose an additional tax on non-Australian citizens which effectively limits the extent that discretionary trusts can have link to foreign persons (or otherwise face a surcharge ). Where an interest in a property is acquired by or held on trust by a discretionary trust , the trustee of the trust may be liable. Why is it relevant to my discretionary trust ? This can have some unintended consequences for discretionary trusts , as each beneficiary that the trustee has a discretion to make a distribution to is. Where variations are yet to be made, the Parliament has set the conditions for qualifying deed amendments. DBA Lawyers’ discretionary trust –– managing the extra duty and land tax surcharges on foreigners This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.

A recent announcement by the Victorian State Revenue Office may have serious transfer duty and land tax ramifications for discretionary trusts that have any potential foreign beneficiaries. Again, a surcharge land tax is a tax for residential land owned by a foreign person at midnight on December of the previous year. Special trusts also do not receive the benefit of a threshold which applies to naturalised persons or those holding a permanent residence visa.

The law has been in place for several years. Trusts are classified as foreign.