Trust Deeds needs updating based on all trusts being classified as "foreign trusts"?

Just for a bit of kicks I've been browsing Dymphna Boholt's site & listening to a few podcasts. Not a member or have any interest in doing any of her courses, but I came across something she was talking about the need for all trust deeds needing updating due to all trusts being classed as "foreign trusts" due to the extended beneficiaries clause in a trust deed covering all family members and those family members Aussie residents & living overseas making the trust a foreign trust. Therefore you will have to pay extra stamp duty & land tax in NSW, VIC & QLD.

She says: "If anyone within that family group is a foreign person or could receive a distribution from a foreign person or a entity, then the trust can be classified as a foreign trust."

She says a clause needs to be added so "No distributions can ever be distributed to a foreign person"

Basically she talks about it from around 4mins to 7mins on the podcast, after that it's just a sales pitch: [PODCAST] Urgent Trust Update – Immediate Action Required

A bit of a scare tactics to get her clients to spend money updating their trust deeds through her services or is it something that is needed for every trust to do?

 

I am not sure of the rationale behind that message.

But it is wrong.

 

Yes it is incorrect.

But if the trustee owns land in VIC, NSW, or QLD there may be more land tax payable if the trust is classed as a foreign person. If the trust is going to buy land there may be additional stamp duty too.

But where the trust does not or will not own land then there is no issue.

Each state has slightly different rules too.

 

Would a discretionary trust where the trustee owns land in NSW be classified as a foreign person based on the standard beneficiaries clauses in the "Definitions" of the deed covering all extended family members & any person or corporation determined by the trustee to be a beneficiary & any charitable body or religious body?

 

There is no such thing as a standard beneficiaries clause. Check with the lawyer who settled the deed or seek legal advice (from a lawyer) because it possibly could.

 

1. If the trust owns no land no issue
2. If the trust does own land in NSW or VIC then see 3.
3. If the trust has POTENTIAL beneficiries who are not citizens then its possible legal advice to amend the deed is needed.

A potential beneficiary mean ANY relative who is not citizen of Australia. Grandparents etc......

 

Read more into the rules, it only applies to residential land. If it's commercial property it doesn't apply or if the property is exempt from land tax in the first place, it also doesn't apply. Therefore a discretionary trust with NSW property that's commercial property or a property exempt from land tax wouldn't need to get the Discretionary Trust deed amended.

 

There you go - just shows you shouldn't believe what you hear in podcasts.

Also shows the importance of outlining all the facts when seeking advice/

 

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One further issue - If the trust has resi and commercial it could be a bigger issue IF a non-resident beneficiary is a potential beneficiary. Legal advice could address that. Going further with Terry's post. ....Early legal advice may have not recommended blending resi and commercial anyway. (I can think of many reasons NOT to).

 

Maybe the standard clause her solicitor uses in the deeds she sells to clients needs amending. Touching them up twice for sub standard work..

 

Almost every disc trust uses a cascading beneficiary clause - even those with bloodline and other complex arrangements. This means a "relative" is included. The recent broad land tax approach to non-resident / non-citizen beneficiaries was not contemplated earlier (and likely too onerous in all cases) and if its there is not complex to amend out either a broad class of persons or specific individuals.