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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