If you’ve acquired residential property or are looking to acquire residential property through a discretionary trust, you may need to amend your trust deeds to avoid exposure to the foreign land tax surcharge and the foreign purchaser duty surcharge (the foreign surcharges).
Under the Duties Act 1997, a trust may be liable for foreign surcharges if any one of the potential beneficiaries is a foreign person, except in the following situations:
- If, before 24 June 2020, a trust satisfied the no foreign beneficiary requirement.
- If the trustee is liable for surcharge purchaser duty on the acquisition of dutiable property that occurred before 24 June 2020 (or after that date but before midnight on 31 December 2020), they will not be liable for the surcharge if the terms of the trust have been amended before midnight on 31 December 2020.
If a surcharge has been paid – the trustee will be entitled to a refund.
- If the Trust is a Testamentary Trust, and:
- The will was executed before 31 December 2020
- The deceased died intestate before, or within two years after 24 June 2020, or
- An order of a court varying the application of the provisions of a will or codicil or of the rules governing the distribution of an intestate estate was made on or before 31 December 2020.
If you’ve acquired property or are looking to acquire property and any one of the potential beneficiaries is a foreign person seek legal advice.
For more information on foreign surcharges and discretionary trusts, click here.