Recent legislative changes affecting discretionary (aka family) trusts and testamentary trusts
Discretionary trusts
Trustees of discretionary trusts will be treated as foreign persons unless the trust deed irrevocably excludes foreign persons as potential beneficiaries, even if there are no actual foreign persons who are beneficiaries.
If the terms of a discretionary trust which has acquired residential land have not been amended to irrevocably exclude foreign beneficiaries before midnight on 31 December 2020, the trustee of the discretionary trust will be liable for:
- surcharge duty (currently 8%) on transfers of dutiable property that have occurred or occur prior to 31 December 2020; and
- surcharge land tax in respect of the 2017, 2018, 2019 and/or 2020 land tax years. The surcharge land tax rate is:
- 0.75 per cent from the 2017 land tax year, and
- two per cent from the 2018 land tax year onwards.
Testamentary discretionary trusts
Trustees of testamentary discretionary trusts which do not prevent a foreign person from being a beneficiary of the trust will be treated as foreign persons for surcharge duty and land tax purposes if the will or codicil is executed after 31 December 2020.
This update is general in nature and if you require specific advice in relation to your discretionary trusts or testamentary trusts contact us to find out more or to arrange an appointment with one of our experienced lawyers.
