There may be times that you need to change your discretionary trust. You may need to plan for succession of the appointor, change the trustee or remove foreign persons from the class of beneficiaries where the trust owns real estate.

For example, if you own real property in New South Wales through a discretionary trust, then the terms of your trust deed will need to be urgently reviewed to determine if in fact your trust is deemed to be a ‘foreign trust’ and if you need to amend it the amendment must be irrevocable for the Chief Commissioner to accept the amendment.  The consequence of being deemed a ‘foreign trust’ is that you will pay:

  • surcharge land tax (currently 2%) in addition to land tax payable for New South Wales residential land owned by the trust; and
  • surcharge purchaser duty (currently 8%) in addition to duty payable in connection with New South Wales residential land purchased by the trust.

Trust Deeds are technical and complex. The first place to start is to review the trust deed to see how to amend the trust deed.  You can only amend the trust if the terms of the trust deed allow it. Consent may be required by a custodian, appointor or other party to amend the trust deed, and if consent is not provided then the amendment cannot be made.

Any proposed amendment to a trust needs to be cross-checked against the possibility that such a variation may constitute a resettlement of the trust. A resettlement could trigger substantial capital gains tax, income tax and additional stamp duty.

A deed of amendment or variation to the trust deed will need to be prepared in accordance with the terms of the trust deed.

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