Good morning

The parliament passed the State Revenue Legislation Further Amendment Act 2020 which became law on 24 June 2020.

The provisions of this Act applies the foreign residents surcharge to discretionary trusts including testamentary discretionary trusts which own residential property, where a beneficiary is or could become a “foreign resident”. Thus, if a trust with a “foreign resident” beneficiary is to purchase a residential property, there is a surcharge on the stamp duty which is currently 8% of the market value of the property with land tax payable each year with a surcharge of 2% of the unimproved value of the property determined by the Valuer General.

What is a definition of a foreign resident

For the purposes of this Act the definition of a foreign resident is important. Australian citizens including those who hold dual citizenship, whether ordinarily resident in Australia or not, are excluded from the definition of foreign resident completely. Any permanent resident holding a visa with no time limitation and has spent 200 days in Australia of the preceding 12 months is also excluded as a foreign person. For companies and businesses, the situation must be considered on their particular merits but as a guide, a less than 5% holding by a foreign resident in a listed or an unlisted company is usually disregarded.

How to gain an exemption form the surcharge

The Act assumes that all discretionary trusts have foreign resident beneficiaries. To gain an exemption from the surcharge, the trust deed must contain an irrevocable clause excluding any foreign beneficiary. These provisions came into effect on 24 June 2020. However, the Act allows for trustees to with trusts owning residential property, to amend with an irrevocable clause excluding foreign resident beneficiaries and produce the amended trust deed with a declaration to Revenue NSW before midnight on 31 December 2020. If your trust deed had been amended and foreign resident surcharge has been paid for a transaction on or after 21 June 2016, the Commissioner will accept applications for refunds up to 23 December 2020 for consideration.

Testamentary trusts that arise when the deponent dies via a will should be re-examined to ensure that any constructive testamentary trust which is created holding residential property either complies for the exemption or that the costs of the surcharge are considered to ensure bloodline bequeathing of residential property. Perhaps it may be appropriate that the assets of a will should be devised via two trusts, one to hold residential property and the other to hold other assets, to ensure the appropriate asset preservation.

As each situation is individual, your particular circumstances will determine the course you need to take. Whilst the main implications of the changes are set out above, only an examination of the aims of constructive trust can reveal what action needs to take place.

If you or any know need further assistance do not hesitate to contact me.

Kind Regards,


Published On: September 8th, 2020 / Categories: Family Law / Tags: /

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