The NSW foreign investor land surcharge will increase to 2% per annum (from 0.75% per annum) with effect from 31 December 2017 for the 2018 land tax year.
The land tax surcharge was introduced in NSW with effect from 1 January 2017 to be imposed on owners of residential land who are ‘foreign persons’. The surcharge also extends to trusts that own residential land which have beneficiaries that are ‘foreign persons’.
The land tax surcharge provisions are very broad and will catch discretionary trusts if the trust deed has a broad definition of beneficiaries, which is typical of most discretionary trust deeds.
In this global age, given the wide class of beneficiaries, there is a high chance that a family member includes someone of international origins who is not an Australian or New Zealand citizen. If any of these potential family members themselves meet the definition of ‘foreign person’ or invest in a company that meets the definition of a ‘foreign person’, and the trust owns residential land in NSW, then the trustee is liable for the land tax surcharge.
Our federal politicians are having to re-look at their family origins (though to confirm their eligibility for holding office!). It is a timely reminder to also consider reviewing your discretionary trust deed and your family situation. If the trust owns residential land in NSW or is considering owning residential land in NSW in the near future, it is worthwhile getting advice.
For more information on how trusts may be caught by the NSW foreign investor land tax surcharge read our eBrief: Land Tax Surcharge: A hidden cost of property ownership in NSW.
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