You may be aware that there have been recent tax changes in relation to ‘foreign persons’ and ownership of residential property. Specifically, these changes can impact discretionary or family trusts with a single foreign beneficiary that hold or acquire residential property. The surcharges operate for stamp duty and land tax purposes in most states in Australia and can increase the cost of the transaction by between 3- 8% (stamp duty surcharges) or up to 2% per annum (land tax NSW).
The definitions of a ‘foreign person’ vary between each state and a single foreign person (broadly not an Australian citizen) in your extended family can cause the Trust to be captured by these additional surcharges. We have had clients impacted by these rules inadvertently and potentially subject to the surcharges.
To minimise the risk of the surcharges applying to your discretionary / family trust, we recommend amending the trust deed to specifically exclude ‘foreigners’ (as defined in specific states or all states of Australia) from being a beneficiary of the Trust.
These amendments should be undertaken immediately where:
the Trust holds residential land in NSW;
vacant / absentee land in VIC; or
intends to purchase property in Australia in the near future.
If you do not currently or intent to hold residential land in the Trust, we can discuss with you the need to make any changes to the trust deed when we complete your next financial statements and tax returns.
If you would like to proceed with the changes to the trust deed for the family trust, download and complete the form and email back to firstname.lastname@example.org . We will then arrange a time to discuss how the rules apply to your specific circumstances.
Future Tax Changes
The law is continuing to change at a Federal and State level in relation to both ‘foreign persons’ definitions and property taxes, including capital gains tax, withholding taxes. We will provide more information on these measures as it becomes available. If you are contemplating a property purchase or sale, please do not hesitate to contact us to discuss potential impacts before proceeding.
Should you have any queries, please feel free to book a meeting.