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NSW Discretionary Trust Deeds Changes.

Discretionary trusts that own residential land in New South Wales or hold an ownership interest in a company or unit trust that owns residential land in New South Wales must amend their trust deeds to exclude foreign persons as beneficiaries before midnight on 31 December 2020 otherwise foreign land tax and duty surcharges could apply.

Changes to residential property laws in NSW will deem discretionary trusts to be ‘foreign persons’ unless the trust deed is amended before midnight on 31 December 2020 to:
• exclude all foreign persons as eligible beneficiaries; and
• prevents any amendment to the exclusion of foreign persons as beneficiaries, so that the exclusion is permanent and irrevocable.

This is the case even if none of the eligible beneficiaries of a discretionary trust are foreign persons.
If a discretionary trust is deemed a ‘foreign person’, surcharge duty of 8% and surcharge land tax of 2% will be payable on any residential land in New South Wales acquired or owned by the trust since the surcharges were introduced in 2016. This will apply to future purchases of land in NSW also.

The changes will apply retrospectively, so that if a discretionary trust:
• paid surcharge duty or land tax but amends its trust deed to permanently exclude foreign persons as beneficiaries before 31 December 2020, the trust may apply for a refund of the surcharge
• owns residential land in New South Wales but does not amend its trust deed to permanently exclude foreign persons as beneficiaries before 31 December 2020, the surcharge duty and land tax may apply for prior years since the surcharges were initially introduced in 2016.

NSW Discretionary Trust Deeds Changes – What Needs to Happen

• Arrange for the trust deeds of any discretionary trusts that own residential land in New South Wales or hold an interest in a company or unit trust that owns residential land to be amended, where necessary and appropriate, to satisfy the ‘foreign person’ exclusion requirements under the changes made by the legislation. This is the case even if the trust deed previously satisfied the New South Wales foreign beneficiary requirements.
• Ensure any trust deed amendments are signed before midnight on 31 December, 2020.
• Submit the trust deed and all variations to Revenue NSW for confirmation that the trust is not a ‘foreign person’ before 31 December 2020.

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