Recently, the State Revenue Legislation Further Amendment Bill 2019 (Bill) was introduced into the NSW Parliament. The Bill contains various measures that will greatly impact property owners in NSW. One major concern is the altered treatment of discretionary trusts that own NSW residential land, relative to the surcharge purchaser duty provision in particular.

Currently, where a foreign person owns residential land in NSW, they are liable for both surcharge purchaser duty (an additional 8%) and surcharge land tax (an additional 2%).

The Bill proposes that a discretionary trust owning land in NSW will be treated as a foreign trust for the purposes of surcharge purchaser duty, where the deed does not exclude a foreign person from being a beneficiary of the trust.

The Bill clearly provides that, for a discretionary trust to avoid being considered a foreign trust, the terms of the deed must irrevocably exclude a foreign person from being a beneficiary under that trust. Where this is not the case, the discretionary trust will be treated as a foreign trust and the higher rate of duty will apply in NSW on acquisitions of NSW land by the trust.

The Bill has a retrospective application date and applies from 21 June 2016, being the date that the surcharge purchaser duty provision was first announced. Transitional relief exists for discretionary trusts that are treated as foreign trusts where they have made the necessary amendments to their deeds before midnight on 31 December 2019 to exclude foreign persons from being trust beneficiaries. Furthermore, this transitional relief also appears to apply to discretionary trusts that were subject to the higher rate of duty prior to the commencement of the Bill.

Please note: while the Bill specifically mentions discretionary trusts being caught by these changes, it may also impact other types of trust structures (eg testamentary trusts).

In summary, as a result of these changes, please review any discretionary trust deeds where residential land is held in NSW, to ensure you are not caught by the changes introduced in the Bill. Please do so before midnight on 31 December 2019.

For any advice regarding the impact of these rules, please contact your Cornwalls representative or someone from the Cornwalls Tax team.


This article is general commentary on a topical issue and does not constitute legal advice. If you are concerned about any topics covered in this article, we recommend that you seek legal advice.