Be careful of recent changes to State-based taxes
By Riley Jones
Because we’re a national organisation, we (and the NTAA generally) generally do not provide advice on State- and Territory-based legislation. However, sometimes changes impact on the users of the documents we provide, and it’s worth giving members a 'heads-up’ on some of them. Some recent changes include the stamp duty and land tax changes affecting some foreign purchasers/owners of real property, which can inadvertently capture discretionary trusts with any foreign beneficiaries (as discussed in an earlier newsletter and in this video from last year).
South Australia has now joined Victoria, New South Wales and Queensland in adding (or threatening to add) a duty surcharge for foreign buyers of residential property. Specifically, South Australia has introduced the Budget Measures Bill 2017, which applies a conveyance duty surcharge of 4% to residential property purchased by foreign buyers and temporary residents from 1 January 2018. Importantly, a trust will be ‘foreign’ where the trustee, a person who has the power to appoint under the trust, an identified object under the trust (e.g., a general beneficiary), or a person who takes capital of the trust property in default (i.e., a default capital beneficiary) is foreign.
It also appears that Western Australia may follow suit, with their Budget due to be handed down on 7 September 2017.
It seems that State Governments are liking these measures more and more, so it’s important to keep a close eye on any developments in this arena.
Note that we have specific deeds for the existing affected States for concerned members, and as legislation is passed for other States we will develop further products.
NSW Duty Changes
Other recent duty developments affecting trusts and superannuation funds include the following changes (amongst others) that were made by the State Revenue Legislation Amendment Act 2017 (NSW) (which received assent on 11 April 2017):
- The amendments clarify that stamp duty can apply to instruments (e.g., deeds) that are in digital form, as well as to written instruments;
- The charging of nominal duty (rather than ad valorem duty) on certain transfers of property has been extended to the custodian of a trustee of an SMSF (e.g., where the custodian holds property under a limited recourse borrowing arrangement) where duty on an agreement for the sale or transfer of the property has been paid and the purchaser is the trustee; and
- The amendments ensure that nominal duty of $50 is chargeable on certain transfers of trust property that are a consequence of the retirement or appointment of trustees only if the Chief Commissioner is satisfied that the transfers are not part of a scheme to avoid duty that involves conferring an interest, in relation to the trust property, on a new trustee or other person so as to cause any person to cease holding a beneficial interest in that property. Ad valorem duty may be chargeable on those transfers, instead of nominal duty, if the Chief Commissioner fails to be satisfied that they are not part of such a scheme. This makes it even more necessary to be extremely careful with any changes to trustees of NSW trusts.