NSW duty update: Revenue Amendment Bill passes lower House and Ruling released on discretionary trusts and foreign persons

1. Revenue Amendment Bill introduced and passes lower House — duty, payroll tax amdts — SMSFs, etc
2. Ruling released on surcharge land tax and duty, discretionary trusts and foreign persons.

The State Revenue Legislation Amendment Bill 2017 (NSW) was on 8 March 2017 passed by the Legislative Assembly without amendment and now moves to the Legislative Council. It is an omnibus-style amendment Bill and proposes a range of amendments to the Duties Act 1997, Land Tax Management Act 1956 and the Payroll Tax Act 2007.

Proposed amendments to the Duties Act include:

• provide for the charging of nominal duty (rather than ad valorem duty) on certain transfers of property to the custodian of a trustee of a SMSF where duty on an agreement for the sale or transfer of the property has been paid and the purchaser is the trustee;
• extend existing exemptions from duty connected with transfers between family members of land used for primary production to (among other things) cover transfers from a SMSF where a member of the fund and the person to whom the land is transferred are family members; and
• provide for an exemption from duty connected with transfers of property between superannuation funds that are required to be made under transitional arrangements relating to the Commonwealth's MySuper reforms

The NSW Office of State Revenue (OSR) has released Revenue Ruling No G 010 — Surcharge Land Tax and Duty — Discretionary Trusts.

Discretionary trust deeds often give the trustee wide powers to distribute income and/or capital, such as to family or other relatives of the settlor and in many cases to charities. If any one of the potential beneficiaries is a foreign person, the trustee may be liable for surcharge. Consequently, a discretionary trust may be liable for the foreign person surcharges even though none of the beneficiaries who actually receive or are likely to receive distributions of income or capital are foreign persons.

The NSW Minister for Finance, Services and Property has approved a variation to statute to allow the Chief Commissioner of State Revenue to exercise a discretion to give retrospective effect to amendments of trust deeds which will remove the trustee's power to make distributions to any person who is a foreign person.

Ruling G 010 explains the operation and effect of this variation to statute. The Ruling says that within 6 months after granting the exemption, the trust deed must be amended so that the trustee is no longer liable for the taxes. If the trust deed is not amended within the required timeframe, the exemption will be rescinded with retrospective effect. This variation to statute is to operate with retrospective effect from 21 June 2016, until retrospective legislation is passed to confirm the concession.

For the purposes of both the surcharges duties and land tax, the Ruling says a person is a "foreign person" on the "relevant date" if the person is a foreign person within the meaning of the Foreign Acquisitions and Takeovers Act 1975 (Cth) and the Foreign Acquisitions and Takeovers Regulation 2015, as modified by section 104J of the Duties Act 1997. Section 104J excludes Australian citizens from the definition of a foreign person.

Source: This content was first published in Thomson Reuters' Weekly Tax Bulletin. To subscribe to Weekly Tax Bulletin, or for more information, please see https://tax.thomsonreuters.com.au/checkpoint/weekly-tax-bulletins/

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of matters.

You can read an earlier ClearLaw article about the foreign duty surcharge.

Order Cleardocs discretionary trust packages

• Discretionary (Family) Trust set up
• Discretionary Trust — excluded beneficiaries that provides options to exclude foreign and/or non blood beneficiaries from the trust set up
• Change of Trustee Discretionary Trust
• Discretionary (Family) Trust Minutes & Resolutions