- On 24 June 2020, the State Revenue Legislation Further Amendment Act 2020 (NSW) received Royal Assent. It clarifies that a trustee of a discretionary trust owning 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.
- The transitional provisions give trustees of discretionary trusts an exemption and refund for foreign surcharges where the trust deed, made on or before 24 June 2020, contains a provision to prevent a foreign person from benefitting.
- Until 31 December 2020, trustees of discretionary trusts have an opportunity to amend their trust deeds to include the provision and the provision must be irrevocable 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.
- In July 2020, Revenue NSW issued Commissioner’s Practice Note CPN 004 Version 2 which provides practical guidance on how surcharges apply in situations where residential property is held by the trustee of a discretionary trust.
The State Revenue Legislation Further Amendment Act 2020 (NSW) (the ‘Act’) received Royal Assent on 24 June 2020. The Act is relevant to trustees of discretionary trusts (including discretionary testamentary trusts) that own or will purchase residential property and have trust deeds that do not contain a term preventing foreign beneficiaries from benefitting under the trust. The transitional provisions under the Act allow for exemptions and refunds of surcharge purchaser duty and land tax, provided that the trust deed contains terms that prevent a foreign person from benefitting.
One of the aims of the Act is to treat Australian discretionary testamentary trusts the same as discretionary trusts for surcharge purposes. The transitional provisions operate differently for discretionary trusts and discretionary testamentary trusts to give trustees time to seek specialist advice and make the necessary amendments.
The Act inserts section 104JA and amends Schedule 1 to the Duties Act 1997 (NSW) (‘DA’), and inserts section 5D into the Land Tax Act 1956 (NSW) (‘LTA’) and Schedule 2 into the Land Tax Management Act 1956 (NSW) (‘LTMA’).