The Victorian State Revenue Office (SRO) introduced Foreign Purchaser Additional Duty provisions on 1 July 2015. Since that time they have been applying a “practical approach” in respect to family discretionary trusts. Trusts that have foreign beneficiaries who have not and are unlikely to receive any distributions based on available information in the future, will not be considered a foreign trust.
The SRO have recently announced that they are no longer taking the “practical approach” and from 1 March 2020 any discretionary trust purchasing property in Victoria will need to have an express beneficiary exclusion clause to avoid the additional purchaser duty. Without this exclusion, the trust will be taken to have foreign beneficiaries and the additional duty will apply, regardless of whether or not there are actually foreign resident beneficiaries or potential beneficiaries. Foreign purchaser duty can be up to 8%.
If you are looking to purchase property in Victoria it is vital that we amend your trust deed as soon as possible and before you commit to purchase to avoid this additional duty.
This change also has the flow-on effect of applying to land tax rates as well. In order to avoid the Absentee Owner surcharge for land tax for Victorian property you already own, you will also need to amend your trust deed. This is quite significant with the surcharge being $5,000 plus 2% for properties with land value of between $250,000 and $600,000 and increasing from there.
If you need more information about the aforementioned amendments, or you require assistance updating your trust deed, please contact one of our tax champions.