The State Revenue Office of Victoria (SRO) has recently announced that from 1 March 2020 it will no longer apply its current ‘practical approach’ to determine if a family or discretionary trust is a foreign trust.
This new approach could have significant stamp duty implications for Australians acquiring Victorian residential property under family trusts.
Under the existing approach, which has been applied for the last four years, the SRO has taken the position that if a family trust that is purchasing property can establish that foreign beneficiaries (including corporations) are unlikely to receive any distributions from the trust, it will not be deemed to be a foreign trust.
Under the SRO’s new approach, it will strictly apply the purchaser additional duty provisions. This means that if the family trust does not specifically exclude foreign beneficiaries or does not have a limited list of beneficiaries not including any foreign beneficiaries, the SRO will regard it as having potential foreign beneficiaries and, therefore, as a foreign trust. The trust will then be liable for an 8% duty surcharge in addition to the standard 5.5% rate of duty.
We recommend that anybody who is purchasing or considering purchasing residential property in Victoria with a family or discretionary trust should review their trust deeds. Trust deeds may be amended, as required, to specifically exclude foreign beneficiaries to avoid being liable for the foreign purchaser duty surcharge.
For further information on these changes or if you would like to have your trust deed reviewed, please contact Special Counsel, John Wellington in Castlemaine on 5472 1588 or Associate, Anna Doughan in Bendigo on 5434 6666.