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Unexpected Extra Tax to be Levied on Trusts - 13th June 2017
When the
then NSW Treasurer, Gladys Berejiklian, delivered her Budget speech on 21 June
2016, she introduced a new foreign investor surcharge on both stamp duty
and land tax on residential real estate. The intention was to take the heat off
the property market and to raise $1bn.
The 2017
budget increased those surcharges so that the following now applies:
|
Foreign
Surcharge Stamp Duty |
Foreign
Land Tax Surcharge |
|
From 21
June 2016 - 4% |
Land held
as at 31 December 2016 - 0.75% |
|
From 31
May 2017 - 8% |
Land held
as at 31 December 2017 onward - 2% |
The above rates apply in addition to the normal Stamp Duty and Land Taxes that would apply.
It has only
recently come to light that in the case of family trusts or discretionary
trusts the surcharge will apply if the Trust has the potential to
distribute income or capital to a foreign person.
The
surcharge will only be avoided if the Deed for the Trust specifically
excludes distributing income to a foreign person. This means the Deed of your family trust may require to be amended. Due to the delay in clarifying this anomaly,
the NSW Government has indicated it will allow Deeds to be amended so that they
retrospectively meet the criteria as at last year's Budget night of 21 June
2016.
We strongly
recommend your Deed be updated as soon as possible to guard against any future
surcharges that may apply. Even if your Trust does not currently own land, the
feeling amongst some commentators is a future amendment of your Deed just
before an acquisition of land could be seen as tax avoidance to circumvent the
application of the two surcharges.
If you have any questions regarding this matter,
please do not hesitate to contact our office.
AV Chartered Accountants - Committed to Your Business Success
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