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Victoria, NSW and Tasmania foreign purchaser duty update — Discretionary Trusts

Victoria, NSW and Tasmania foreign purchaser duty update — Discretionary TrustsSince the foreign purchaser duty surcharge was first introduced in Victoria in 2015, it has been introduced in NSW, Tasmania, WA and SA (and only in respect of land tax in the ACT). The various changes in law and administrative practice in these jurisdictions, has made this a challenging area of law.

In particular, the relevant legislative definitions markedly differ between jurisdictions. Some jurisdictions may have a ‘change of foreigner status’ or ‘change of intention’ regime which can impose an additional duty years after the initial imposition of a duty. Also, some jurisdictions may allow the commissioner to determine that a trust is a foreign trust despite not otherwise meeting the legislative definition.

Further, the practices and policies of the relevant state revenue offices can have a significant impact on the way the law is interpreted and applied by those offices and their policies may not coincide with a generally accepted legal interpretation.

This article is intended to provide an overview of recent developments in this area in Victoria, NSW and Tasmania only.

Victoria — SRO changes approach on foreign trusts

The Victorian State Revenue Office (‘SRO’) has announced that from 1 March 2020 it will no longer apply what it refers to as the ‘practical approach’ for dealing with discretionary trusts that may have been caught out by the foreign purchaser additional duty (‘FPAD’) provisions. See the Vic SRO website for more.

Broadly, the SRO will return to a strict application of the law in determining when a discretionary trust will be a foreign trust for the purposes of the Duties Act 2000 (Vic). These provisions provide that where a trustee has the discretion to distribute all of the trust’s income or capital to any beneficiary and a beneficiary of the trust is a ‘foreign person’, the trust will be deemed to be a foreign trust for FPAD purposes. For an explanation of the FPAD provisions you can read our article here.

As the FPAD rate is currently 8% in Victoria which applies in additional to the usual rate of duty of 5.5%, the mismanagement of this issue can result in substantial additional duty being incurred if the trust is a foreign trust.

Any client seeking to establish a discretionary trust should be told to seek advice as to the application of these laws. If it is intended that foreign persons are excluded from benefitting under the trust, specific trust provisions are required. As various risks or difficulties can arise when varying the deed of an established trust, it is preferable that any required exclusions are included from the commencement of any trust.

For a trust already in existence, a variation can be made to vary the terms of the trust to exclude foreign persons. However, any change to the beneficial interests of a trust carries a risk of resettlement of the trust and care should be taken in this regard.

New South Wales — State Revenue Legislation Further Amendment Bill 2020

The State Revenue Legislation Further Amendment Bill 2020 (NSW) (‘NSW Bill’) was originally introduced in October 2019. See our article here for more: NSW duty and land tax surcharge changes — action needed before 31 December 2019

Broadly, the amendments contained in the NSW Bill would provide that a trustee of a discretionary trust is taken to be a foreign trustee if the terms of the trust do not prevent a foreign person from ever being or becoming a beneficiary. Such exclusionary provisions must be irrevocable.

The NSW Bill provides for transitional arrangements that have retrospective effect to the time these surcharges were introduced so that trustees who may have incurred this surcharge duty or land tax may also be exempt from liability. The transitional provisions previously required that any affected trust must be varied before 31 December 2019 to avoid the surcharge.

The NSW Parliament however has recently amended the NSW Bill, to provide that the relevant date for trustees to vary the terms of the trust to be exempt from the duty surcharge is 31 December 2020. See the NSW Parliament website for more.

Tasmania — Duties Amendment Bill 2019 (Tas)

The Duties Amendment Bill 2019 (Tas) (‘Tas Bill’) was introduced in the Tasmanian Parliament on 26 November 2019. In respect of the foreign purchaser surcharge, if passed the Tas Bill will:

  • increase the additional duty payable for foreign purchasers from 3% to 8% (applying to written agreements entered into from 1 April 2020);
  • increase the additional duty on primary production property from 0.5% to 1.5%;
  • provide for an exemption where a person ceases to be a foreign person within six months of the dutiable transaction;
  • provide for an exemption where the property is held by spouses where one spouse is a foreign person and the property will be their principal place of residence, including where the land is vacant but occupied within two years;
  • provide for transitional provisions allowing for variation to trust deeds within 6 months of Royal Assent of the Tas Bil; and
  • provide the Tasmanian Commissioner with a wide discretion to determine that a person is not a foreign person.


With various changes occurring to this additional duty across the country advisers, should advise clients to seek advice and consider these laws before establishing a discretionary trust or purchasing property.

Further, clients with existing trusts need to determine whether there is any need to vary their existing deed as it may include foreign beneficiaries. The legislation is very broad in covering many typical family trusts unless an appropriate exclusion is made for foreign persons.

DBA Lawyers are often engaged to prepare or amend discretionary trust deeds for the purposes of the foreign purchaser surcharge provisions. We often consult with practitioners around Australia in respect of dealing with these provisions in various jurisdictions.

Various articles we have written on this area can be found here:

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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.

Note: DBA Lawyers hold SMSF CPD training at venues all around. For more details or to register, visit or call 03 9092 9400.

For more information regarding how DBA Lawyers can assist in your SMSF practice, visit

By Shaun Backhaus, Lawyer ([email protected]) and Daniel Butler, Director ([email protected]), DBA Lawyers


28 February 2020

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