Yes, a corporation and a trustee of a trust can be a foreign person. This includes:
A person holds a substantial interest in an entity or trust, if:
Two or more persons hold an aggregate substantial interest in an entity or trust if:
A person holds an interest of a specified percentage in an entity if the person, alone or together with one or more associates of the person:
An interest in a trust includes:
When a trustee of a discretionary trust purchases residential property in NSW, and any beneficiary of that trust is a foreign person, the trustee may be liable to the surcharge purchaser duty if it does not adhere to the requirements under the variation to statute.
The purpose of the variation – effective from 21 June 2016 – is to avoid discretionary trusts becoming inadvertently liable for surcharge purchaser duty and/or surcharge land tax.
Amendments to a trust deed must prevent potential discretionary beneficiaries that are foreign persons from receiving distributions as to income and/or capital under the trust.
Should the trust deed contain named beneficiaries who are foreign persons, such beneficiaries must be removed from the trust deed as beneficiaries.
It is not sufficient that named beneficiaries are merely prevented from receiving distributions, such as through a general clause excluding foreign persons from being beneficiaries.
Any amendments to the trust deed must also be irrevocable.
If the variation is or includes a declaration of trust, the variation will be liable to duty on the unencumbered value of the dutiable property at the date of the declaration, without any deduction for liabilities of the trust.
In the case of a discretionary trust over dutiable property, an assignment of the interest of a taker in default will be a dutiable transaction over dutiable property, and will be liable to duty on the greater of the consideration for the transfer and the unencumbered value of the 'dutiable property'.
The following variations to discretionary trusts are not dutiable transactions over dutiable property, and will not be liable to duty:
For more details, see Revenue Ruling DUT 017.
Even if you never intend to distribute income or capital to the foreign persons who are beneficiaries of my discretionary trust, you do have to pay surcharge purchaser duty.
It is irrelevant that a trustee may never exercise discretion to distribute income and/or capital to a foreign person. For a discretionary trust, each beneficiary to whom the trustee has discretion to distribute the income or property is deemed to have the maximum percentage interest in the income or property that the trustee may exercise discretion to distribute to them.
If you have amended your trust deed to exclude foreign persons as beneficiaries, you can apply for a refund for surcharge purchaser duty.
You may apply for a reassessment and refund of surcharge purchaser duty paid in respect of a dutiable transaction entered into on or after 21 June 2016 if you have now amended the trust deed to exclude foreign persons as beneficiaries.
The Chief Commissioner will accept applications for reassessment up to six months after the date of legislative amendment.