Changes to discretionary trusts are coming into effect on the 31st of December 2020 which may expose trustees to foreign surcharges.
A surcharge rate on purchaser duty and land tax has applied to a “foreign person” in respect of residential land owned by discretionary trusts since 2016. Previously, taxpayers holding land in discretionary trusts could avoid the surcharge by not including foreign persons as beneficiaries.
Now, all trustees, beneficiaries and potential beneficiaries will be assumed to be a ‘foreign person’ unless changes are made to the deed.
Trustees of a discretionary trust that has acquired residential land will be deemed a foreign person unless the trust deed specifically outlines that:
If the terms have not been amended to irrevocably exclude foreign beneficiaries in your discretionary trust by the 31st of December 2020, the trustee will be liable for the following foreign surcharges (in addition to ordinary rates), such as:
Testamentary discretionary trusts which do not prevent a foreign person from being a beneficiary will also be subject to foreign surcharges if the will or codicil is executed after 31 December 2020.
If you have a discretionary trust in place which owns land, Donovan Oates Hannaford are ready to assist with amending your trust to exclude foreign beneficiaries from the class of beneficiaries.
Contact Donovan Oates Hannaford today if you require legal support in relation to the above topic.