Trustees of discretionary trusts with real property in New South Wales are reminded to amend their trust deeds by 31 December 2020 to avoid foreign surcharge stamp duty and land tax.

New South Wales

From 24 June 2020, trustees of discretionary trusts are taken to be foreign persons for surcharge land tax and stamp duty purposes unless the relevant trust deed expressly and irrevocably prevents a foreign person from being a beneficiary under the trust deed.

If your discretionary trust deed is not amended by the deadline of 31 December 2020, any one of the potential beneficiaries is taken to be a foreign person, or if the terms of the trust deed allow for income to be distributed to a foreign person at any time, the trustee may be deemed to be a foreign person and liable for surcharge purchaser duty and/or surcharge land tax, even if none of the beneficiaries who in fact receive or are likely to receive income is a foreign person.

Surcharge stamp duty of 8% presently applies in New South Wales if the buyer of residential property is a foreign trustee, and surcharge land tax of 2% applies if the owner of residential property is a foreign trustee.

The legislation also applies to wills or codicils with testamentary trusts executed after 31 December 2020, if the deceased dies intestate before 24 June 2022, or if a court order varying the provisions of a will or codicil in relation to distribution of an intestate estate is made before 31 December 2020.

While no amendment is required to wills or codicils executed up to 31 December 2020, any new will or codicil intending to establish a testamentary trust executed after that date should include an irrevocable “no foreign beneficiary” clause to avoid surcharge purchaser duty and surcharge land tax.


The position in Victoria is similar to New South Wales.  From 1 March 2020, discretionary trusts with potential foreign beneficiaries will be regarded as foreign trusts for the purposes of surcharge stamp duty and land tax.

Stamp duty surcharge of 8% applies if the buyer of residential property is the trustee of a foreign trust, and surcharge land tax of 2% applies to land owned by a trustee of an absentee trust.  A discretionary trust will be an absentee trust if it has at least one beneficiary who is a foreign person and is absent from Australia.

From 1 March 2020, persons considering purchasing residential property may ensure they are not liable for the foreign purchaser surcharge duty and land tax by using either a different purchase vehicle (that is not a foreign purchaser) or by amending the trust deed to include appropriate restrictions on foreign persons as potential beneficiaries. Any amendment to the trust deed must be completed prior to settlement of the transaction to ensure the exemption from surcharge duty and land tax applies.

Act now

New South Wales trustees should amend their discretionary trust deeds before the deadline of 31 December 2020.  Victorian trustees should also consider amending their discretionary trust deeds.

Our commercial team at Polczynski Robinson is available to assist. For more information, please contact Julie Briscoe and Hourie Khdrlarian.