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Stamp Duty and Lax Tax Surcharges

February 7, 2017 4:49 pm

The Issue: Stamp Duty and Lax Tax Surcharges Applicable to “Foreign/Absentee” Trusts

Recent changes to the Duties Act 2000 (Vic) and the Land Tax Act 2005 (Vic) have introduced two surcharges that affect both Stamp Duty and Land Tax payable by purchasers or holders of real estate that are considered “foreign purchasers” or “absentee owners”.

In relation to the Stamp Duty surcharge, for the purposes of discretionary and hybrid trusts, the definition of “foreign purchaser” covers any trust in which a foreign beneficiary can potentially receive more than 50% of the capital of the trust. As discretionary and hybrid trusts often include a wide definition of beneficiaries (for example, distant relatives of the Specified Beneficiaries), if any foreign resident falls within that definition of beneficiaries, then the trust may be considered a “foreign purchaser”.

This would be a strange consequence but is certainly one way of interpreting the legislation.

In relation to the Land Tax surcharge, the definition of “absentee trust” is limited to a trust where a foreign resident is expressly nominated as Specified Beneficiary.

It should be noted however, that there is some uncertainty as to how the SRO will interpret and apply the relevant provisions, especially in relation to the Stamp Duty surcharge.

It is our understanding that the issue outlined above is also relevant for trustees of trusts proposing to acquire/hold property in NSW and QLD however we recommend that you seek advice from lawyers in those jurisdictions to confirm whether any change to your precedent is required.

For a high level summary of the changes in the Victorian legislation relevant to trusts, please refer to the attached table.

TABLE OF DUTIES ACT 2016 (2)

Should you have further questions or require advice please contact our office.

This information was provided to us by Kliger Partners.