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Have you reviewed your discretionary trust deed recently?

Do you have a discretionary trust or a testamentary trust which has acquired or may acquire residential land? If so, this may apply to you. 

If you own, have purchased or intend to purchase residential property and it is held or will be held in your discretionary or family trust, then a stamp duty surcharge of 8% applies if the buyer of residential property is considered a foreign trustee. Further, a land tax surcharge of 2% applies if the owner of residential property is a foreign trustee.

From midnight on 31 December 2020, the trustee of a discretionary trust will be considered as being a foreign trustee if the trust deed is capable of having beneficiaries who are foreign persons.  This applies even if there are no actual foreign persons who are beneficiaries.

Therefore the trust deed must expressly:

  • exclude a foreign person from being a potential beneficiary of the trust, and
  • include terms which ensure any terms relating to the exclusion of foreign persons are incapable of amendment.

If the terms of your discretionary trust have not been amended to exclude foreign beneficiaries before midnight on 31 December 2020, the trustee will be liable for:

  • surcharge duty on transfers of dutiable property that have occurred or occur prior to 31 December 2020; and
  • surcharge land tax in respect of the 2017, 2018, 2019 and/or 2020 land tax years

This also applies for testamentary discretionary trusts which do not exclude a foreign person from being a beneficiary of the trust if the will or codicil is executed after 31 December 2020.

The solicitors at Mullane and Lindsay can review your trust deeds before the above deadline and advise you of any amendments that may be required.

Liability limited by a scheme approved under Professional Standards Legislation

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