If you have a discretionary or hybrid trust that owns residential land in NSW you may need to have your deed amended before 31 December 2018.

Effective from 21 June 2016, duty and land tax surcharges are imposed where residential land in New South Wales is to be acquired or is owned by foreign persons. Where the land is to be acquired or is owned by a discretionary trust, the trustee of the trust is a foreign person if any foreign persons are beneficiaries (whether or not named in the trust deed) under the trust.

At the time the legislation was passed, no guidance was published by Revenue NSW as to how it intended to apply the laws. Where a discretionary trust owned residential land, it was usually necessary at the time, in order to avoid surcharge land tax being imposed for the 2017 land tax year, to amend trust deeds for the trusts to exclude foreign persons from benefiting under the trusts prior to 31 December 2016.

On 19 September 2017 Revenue NSW published guidance stating that it considered that the exclusion of foreign persons as beneficiaries of a trust needed to be irrevocable in order to avoid surcharge duty and land tax being imposed on the trustee.

The legislation does not provide that the exclusion of foreign persons must be irrevocable. For this reason, many deed amendments were not prepared to be irrevocable.

Where an amendment was made prior to 19 September 2017 to exclude foreign persons but not irrevocably, Revenue NSW has agreed to allow trustees up until 31 December 2018 to make further amendments to trusts deeds so that the exclusion of foreign persons is irrevocable.

Accordingly, if you had a foreign person trust deed amendment prepared before 19 September 2017, or where you had one prepared after this time and you are not sure whether it is irrevocable, you should contact us before 31 December 2018 to review whether a further deed amendment now needs to be made.