Changes to Trusts Purchasing Properties

Check with Scott Partners if you are planning to purchase residential property in a family trust! A new surcharge has been implemented by the SRO.

From 1 March 2020, the Victorian State Revenue Office changed its approach to the foreign duty surcharge on residential property acquired by discretionary trusts. Previously, the SRO applied a practical approach whereby a discretionary trust that acquired property and had not previously distributed to a foreign resident or was deemed not likely to distribute to a foreign resident, would not be liable for this surcharge.

Discretionary trusts are liable for the additional 8% duty charge if more than 50% of the trust’s capital could be distributed to a foreign person, company or trust.

A typical feature of discretionary trusts is the wide group of potential beneficiaries, which may (intentionally or otherwise) include foreign persons, companies or trustees of foreign trusts, depending on your extended family circumstances.

Contact Scott Partners to discuss how we can assist you to avoid this surcharge

If residential property is to be purchased by a discretionary trust (whether the trust is already in existence or is to be established prior to the purchase) from 1 March 2020, to avoid the surcharge, the trust deed should be reviewed and amended to exclude foreign beneficiaries prior to settlement. Scott Partners can arrange this deed amendment on your behalf.