Your new purchase or holding existing real estate in your family trust will attract new taxes under new law unless you amend your trust deed.
Your family trust defines the class of beneficiaries broadly and includes any overseas beneficiaries. This means that under new law (section 104L of the Duties Act 1997 (NSW) and section 5A of the Land Tax Act 1956 (NSW)) your trust will be classified as a “foreign person”, and property it buys or holds will be liable to additional stamp duty of 4% on purchase and additional land tax of 0.75% annually.
Major changes to the Duties Act 1997 (NSW) and Land Tax Act 1956 (NSW) have introduced a Surcharge Purchaser Duty of 4% and Surcharge Land Tax of 0.75% for foreign persons acquiring or owning NSW residential land.
The Surcharge Purchaser Duty approximately doubles the stamp duty payable when purchasing/transferring NSW residential land.
The Surcharge Land Tax increases land tax already payable by almost 50%.
A foreign person is defined under sections 5, 17 and 18 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) and s104J of the Duties Act 1997 (NSW).
For discretionary trusts, if any beneficiary within the class of beneficiaries is a foreign person, the trustee will be assessed as a foreign person and will be liable for Surcharge Purchaser Duty when purchasing NSW residential land and Surcharge Land Tax for all NSW residential land owned by the trust.
Every discretionary trust has a class of beneficiaries which includes foreign persons. Every discretionary trust will be liable for Surcharge Purchaser Duty and Surcharge Land Tax. Don’t wait and get caught.
The NSW Office of State Revenue (OSR) collects information on land owners. It obtains information from over 50 agencies and has sophisticated data matching and analytics capabilities to identify, assess and prosecute for tax.
In 2014-2015, the OSR investigated 22,600 landlords that were not assessed for land tax and/or had incorrect exemptions applied and from these investigations identified $151 million in additional land tax and of 118 duties landholder and land rich investigations identified an additional $38.8 million in duty.
A discretionary trust is still one of the best vehicles to buy real-estate because of the 50% CGT discount that applies and asset protection, but to avoid your discretionary trust being subject to Surcharge Purchaser Duty and Surcharge Land Tax contact Antunes to amend your discretionary trust deed to ensure your trust will not be assessed for these new taxes.
This trust amendment will not trigger stamp duty or capital gains tax.
To amend your deed please contact Tim Arvanitis or Stefan Stojkovic at Antunes Lawyers on 02 9964 0499.