Foreign purchaser additional duty provisions were introduced by the Victoria State Government in 2015. The effect of these provisions were that where a foreign natural person, foreign corporation or foreign trust buys residential land (and potential residential land), an 8% stamp duty surcharge is payable by the trust on top of the base rate stamp duty.

The State Revenue Office has announced that from 1 March 2020 all discretionary trusts will be deemed to be a foreign trust for stamp duty purposes, unless the trust specifically excludes foreign beneficiaries. This means that discretionary trusts purchasing residential land will be liable to pay the 8% surcharge in stamp duty unless the trust deed prevents a foreign person from being a beneficiary of the trust.

Discretionary trust deeds should be amended to specifically exclude foreign beneficiaries, noting that foreign beneficiaries may include foreign corporations and other trusts. This approach will not apply to contracts of sale or nominations made before 1 March 2020. Any amendment to a trust deed to exclude foreign beneficiaries must be done prior to settlement of the property transaction.

Trustees contemplating buying residential property must ensure that their trust deeds exclude foreign beneficiaries or consider a different purchase vehicle that is not a foreign purchaser. If you are considering purchasing a property in your discretionary trust, please contact us first to review your trust deed and if necessary, prepare the required amendments so that you are not charged additional stamp duty.