The State Revenue Legislation Further Amendment Act of 2020 has received Royal Assent.

In short, the Act indicates that any discretionary trust or family trust or testamentary trust that owns or will purchase residential property, may be subject to surcharge land tax and surcharge stamp duty.

This means that if a discretionary/family/testamentary trust is purchasing residential property, it will be charged an additional 8% of the market value of a property by way of surcharge stamp duty.

In addition, surcharge land tax over and above the standard rate, is increased by 2% on the unimproved value of the land.

Land tax is particularly nasty as it is levied each year on the 31 December.

Further there is no threshold amount when a trust is involved and land tax is payable on the entire unimproved value of the land annually.

If you have a discretionary/family/testamentary trust, it is more than likely you will receive a letter from Revenue New South Wales indicating that a trustee of a discretionary trust/family trust is deemed to be a foreign person and potentially subject to such additional surcharge taxes.

There is, however, a way to avoid the surcharge.

This involves reviewing the terms of the Trust Deed and if appropriate, amending the trust deed (provided it has an amendment power) to exclude current and future foreign person beneficiaries and ensuring that such amendments to the trust deed are irrevocable.

If you wish to take advantage of that opportunity however, you must make the amendment prior to the 31 December 2020.

If you do not make that change to your trust deed, your trust will not be able to avoid the surcharge duties and taxes.

Revenue New South Wales are regularly requesting copies of trust deeds to check whether those amendments have been made.

If you have a discretionary/family/testamentary trust and own or intend to own residential property, you need to get urgent legal advice.

At Everingham Solomons we have the expertise to assist you because Helping You is Our Business.

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