Stamp duty surcharge risk for trusts

Recent changes to duty legislation in New South Wales, Victoria and Queensland has meant that “foreign persons” who purchase certain types of residential land in each of these states, will attract a foreign duty surcharge as determined in each of those states relevant Acts. Legislation in New South Wales and Victoria also imposes a land tax surcharge.

Most family/discretionary trusts have wide beneficiary classes. As a result, it is probable that many family trusts have a foreign person as a beneficiary. For example, the primary beneficiary’s grandchild or parents might live overseas

The nature and terms of a family/discretionary trust is such that usually a beneficiary does not have a defined interest in the trust. However, for the purposes of applying the foreign duty surcharge, the legislation in New South Wales and Victoria has deemed each beneficiary in a discretionary trust to have a 100% beneficial interest in the trust fund. This means that if a foreign person (as defined) is not excluded from receiving a benefit from the trust, then the trust may be subjected to the higher duty rates. The position is different in Queensland.

If you are going to purchase land in a trust, you should ensure that you trust deed specifically excludes “foreign persons” from being beneficiaries. Only very recent trust deeds are likely to be structured thus way


Abolition of certain New South Wales Stamp Duties

New South Wales will abolish the following duties for transactions made on or after 1 July 2012:

  • duty on transfers of shares and/or declaration of trusts over shares in a NSW company;
  • duty on transfers of units in a NSW unit trust;
  • duty on transfers of NSW business assets other than land and/or declaration of trusts over NSW business assets other than land; and
  • duty on mortgages over NSW property.

The abolition will bring the NSW duty regime into line with the Victorian duty regime where generally only land transfers, declarations of trusts and significant acquisitions of shares or units in NSW land holder entities will be subject to duty.

However, unlike Victoria, the due date for payment of NSW duty will remain at three months from the date of the dutiable transaction or relevant acquisition.

Anti-avoidance measures for NSW duty being abolished

The Government has implemented measures to prevent avoidance of duty arising from the abolition of the above duties

These measures provide that transfers of NSW business assets other than land and/or declaration of trusts over NSW business assets other than land entered into after 1 July 2012 will continue to be dutiable if the transaction was entered into pursuant to:

  • an option granted before 1 July 2012; or
  • another arrangement made before 1 July 2012 in which the main or only purpose of the arrangement was to defer the transaction until 1 July 2012.


Some of these changes were not proceeded with in the recent 2012 NSW state budget . Contact us for further information