Foreign Beneficiaries? Holding Property on Trust in NSW? Trustees Beware!

Commercial, Wills and Estates

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DATE PUBLISHED: November 26, 2020


All trustees of discretionary trusts that own real property already have a heightened awareness of state taxes, especially if any beneficiaries of the discretionary trust are currently, or could be, foreign.

On 24 June 2020, the State Revenue Legislation Further Amendment Act 2020 (NSW) (Amendment) received Royal Assent. The Amendment clarifies, amongst other things, the surcharge land tax and surcharge purchaser duty consequences for a trustee of a discretionary trust (including testamentary trusts) owning property in NSW if that trust has ‘foreign beneficiaries’. The Amendment also contains transitional provisions that provides trustees the ability to apply for an exemption, or refund, of these tax and duty liabilities.


The Amendment considers that not all beneficiaries will be expressly named in the trust deed (Potential Beneficiaries). Potential Beneficiaries are often nominated by class, rather than name, due to changes in circumstances (e.g. spouses) or because they did not exist at the time the trust was executed (e.g. children and grandchildren). Should a Potential Beneficiary be considered a ‘foreign person’,[1] the trustee of a discretionary trust will also be considered a foreign person for the purpose of foreign surcharges.

A solution considered by some trustees may be to simply not distribute or apply any benefit of the property to a Potential Beneficiary, who is considered a foreign person, to avoid the additional foreign land tax and duty surcharges. However, the Amendment doesn’t allow for this. Should there be a Potential Beneficiary, who is considered a ‘foreign person’, the trustee will still be liable for foreign tax and duty surcharges.

To avoid being assessed as a foreign trustee, the Commissioner of State Revenue for NSW has applied the transitional provisions in the Amendment and has provided two requirements that must be met by the trustees of the respective trust deed. These being:

  • No foreign beneficiary requirement; and
  • No amendment requirement.

Once these amendments have been made to the trust deed, so that they satisfy the above requirements, they must be irrevocable.


The trust deed will have to be amended to irrevocably exclude foreign beneficiaries before midnight on 31 December 2020. If the trust deed is not amended and the trust is recognised as a foreign trust, and NSW property was held in respect of the 2017, 2018, 2019 and/or 2020 land tax years, the trustee will be liable for foreign tax and duty surcharges.

The trustees of a testamentary trust created under a will of a person who was not a foreign person immediately before their death will not be considered a foreign trustee if the will was executed before 31 December 2020 even if the trust does not prevent a foreign person from being a beneficiary of the trust. Those executing wills after that date should consider the potential duty and land tax implications.


If your trust has foreign beneficiaries (which itself requires a careful examination) and you would like to be exempt from the foreign land tax and duty surcharges, we can assist you by:

  • understanding what type of property the trustee of the discretionary trust owns, where that property is situated and which state or territory law applies for the land tax or duty purposes;
  • providing advice on whether you have the ability to satisfy any exceptions or exemption requirements;
  • undertaking amendments to your trust deed;
  • advising on situations where beneficiaries or potential beneficiaries become foreign, and what the reassessments risks are.

[1] Duties Act 1997 (NSW) s 104J(1); Foreign Acquisitions and Takeovers Act 1975 (Cth) s 4.


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