NSW Land Tax Surcharge - only discretionary trusts or hybrid trusts too?

Seems like NSW Revenue is sending out letters to all trusts. Does this only apply to discretionary trusts or also to hybrid trusts too? Are hybrid trusts considered as a discretionary trust to them?

It looks like all trusts must upload their trust deeds to their site as proof that no foreign persons are able to receive a distribution from a discretionary trust. I wonder what happens if someone doesn't do it, or just receives the letter and throws it out. Will they automatically charge the trust a NSW Land Tax Surcharge?

They say after logging in to their site you must:

 

the act doesn't differentiate between discretionary, hybrid or unit trusts.

seek legal advice, it is likely the trust deed will need amending.

 

Hi Terry,

Is this something you do or do you have any suggestions on any lawyers who are capable on doing this correctly? Any ideas on rough costs of amending a deed? Thanks

 

yes we do these. I charge $990

 

So the deed would have to limit a beneficiary class to australian tax residents?

 

It would need to exclude 'foreign persons' from ever potentially benefitting from the income or capital of the trust, with this being unable to be changed. NSW law.

 

Yes just done mine with the hello from Terry, plus found some gaps in my trust, regretting not seeking legal advice to tailor made a trust but having my accountant setting up the trust many years ago

 

A hybrid trust is far more complex. Hybrid trusts that issue units would also need to ensure the register of unitholding is maintained and OSR advised. The deed may be unable to prevent foreign persons for fixed rights (units) but allows restrictions on discretionary elements.

DTs are far easier to amend

 

We have a trust that we moved a number of properties out of in 2008.

As at 2016 which is the commencement date for this amendment we only had one low value property at Moree left in the trust with a land value of approx. $50k.

We have a business trading within the trust but have not held residential property in the trust since 2018 when we sold the Moree property.

The way I read the amendment it is only applicable for trusts that have or had residential property interests after 2016.

This being the case if we do not amend the trust deed to exclude foreign ownership then the biggest risk is an additional 2% land tax penalty for two years on a land value of $50k, ie; two fifths of bugger all.

This being the case, and with no intention of buying property within this trust again is there any reason why we should spend money having the trust deed amended?

Cheers

Andrew

 

This applies to all trusts excepting a superannuation trust and public trusts (eg listed vehicles)

If the trust doesnt own property it need not amend a deed. If it proposed to later acquire property it is essential the deed be amended PRIOR to any NSW land purchase contract being netered into as surcharge stamp duty could impact that trust. Seek legal advice BEFORE buying on the legal position at that time.

Foreign surcharges and discretionary trusts v2

 

Yes best to avoid restricting beneficiaries unless it is needed