Discretionary Trust - deed of variation (excluding foreign persons)
Discretionary Trust - deed of variation (excluding foreign persons)
Use Cleardocs to create a deed of variation to a discretionary trust to prevent distributions to ‘foreign persons’. Upon signing the deed of variation and the minutes, you will be excluding any person, (including any named beneficiary) who is or who at any relevant time is, a ‘foreign person’, from receiving distributions of income and/or capital from the trust.
If your discretionary trust already contains a named beneficiary who is a ‘foreign person’, this product cannot assist you to prohibit distributions to that person.
There are important matters to be considered before using this product. You must obtain legal advice and will need to ensure that you have read and understood the related FALQs.
Cleardocs also has these trust set up packages available:
Family Trust Trustee bundle — a comprehensive and seamless workflow solution for a discretionary (family) trust set up with a corporate trustee
Before commencing with ordering this Deed Of Variation (Excluding Foreign Persons), you will also be presented with a series of questions which will assist in identifying if this type of Deed of Variation is suitable for your requirements. If your answers to the questionnaire suggest that this product may not be the most suitable option, you will be advised to contact the Cleardocs Help Desk to discuss the type of Deed of Variation you require.
The master documents are written in plain
language and are signed-off by our lawyers at Maddocks.
The trust does not require an underlying Cleardocs deed
Pre-population of trust details from earlier Cleardocs orders - saving you typing
Easy to use question interface
Extensive online help and local phone support
What documents are included in the Cleardocs package?
The Cleardocs package includes:
the deed of variation to discretionary trust deed;
related minutes of the trustee(s); and
an Establishment Kit explaining what to do next.
Cleardocs deed not required
You can use this product even if your existing discretionary trust does not have a Cleardocs deed.
Seek legal advice
The Discretionary Trust – deed of variation (excluding foreign persons) information set out here should be considered general in nature, and in no way interpreted as legal advice. You must always seek your own independent legal, accounting and financial advice about your particular situation. The summary on this page is for information purposes only.
Frequently Asked Legal Questions
Cleardocs is not a law firm. So as with all the legal material on this site,
the answers to these "frequently asked legal questions" are provided by the law firm
Maddocks. Cleardocs does not endorse those answers.
The criteria which makes a person or entity a 'Foreign person', is determined differently by the laws in each State and Territory. Generally, an individual is a 'foreign person' if they are not an Australian citizen, or not the holder of a permanent Australian visa. An entity is a 'foreign person' if it is a foreign corporation or the trustee of a foreign trust.
The relevant definitions in each jurisdiction include the following:
a 'foreign person' as that term is defined in section 4 of the Foreign Acquisitions and Takeovers Act 1975 (Cth);
a 'foreign person' or a 'foreign trustee' as each of those terms are defined in the Duties Act 1997 (NSW);
a 'foreign person' as that term is defined in the Land Tax Act 1956 (NSW);
a 'foreign person' as that term is defined in the Duties Act 2001 (Qld);
a 'foreign natural person', a 'foreign corporation' or a 'foreign trust' as those terms are defined in the Duties Act 2000 (Vic);
an 'absentee person' as that term is defined in the Land Tax Act 2005 (Vic);
a 'foreign person' as that term is defined in the Stamp Duties Act 1923 (SA);
a 'foreign person' as that term is defined in the Duties Act 2008 (WA);
a 'foreign person' as that term is defined in the Duties Act 2001 (Tas);
a 'foreign person' as that term is defined in the Land Tax Act 2004 (ACT); and
an individual who is not an 'Australian citizen' or 'permanent resident', a 'foreign company' or the trustee of a 'foreign trust' as those terms are defined in the Land Tax Act 2010 (Qld)
Also, the Cleardocs Trust Deed (excluding foreign persons) includes in the definition of 'foreign person':
any other person who, by virtue of their interest or deemed interest in the trust together with their status or deemed status as a foreign person — in each case as determined under legislation similar in effect to the above in any jurisdiction in Australia — would expose the trustee (or the trust assets) to a surcharge rate of stamp duty or land tax or similar tax charge.
What is foreign purchaser duty surcharge and land tax surcharge (foreign person surcharges)?
Foreign purchaser duty surcharge is the additional rate of land transfer duty which must be paid by a person who is a 'foreign person' when they enter into a transaction to acquire (or concerning) residential land/property. The percentage of surcharge land transfer duty which is calculated on the dutiable value of the land/ property will vary between States and Territories.
Land tax surcharge is paid by 'Foreign Persons' who own land in a State or Territory of Australia and is calculated on the taxable value of all land owned at the end of each year. The land tax surcharge is added to the usual land tax rates ordinarily paid by landowners (this applies to all land (not just residential land) in all relevant jurisdictions except ACT).
Can I exclude a foreign person from receiving trust distributions?
Yes, you can exclude 'foreign persons' from receiving distributions of income/capital from a trust by ensuring that the trust deed is carefully drafted in this way. The Cleardocs Deed of Variation (excluding foreign persons) can vary your existing trust deed in this way.
What if a foreign person is already named as a beneficiary in my deed?
The Cleardocs Deed of Variation (excluding foreign persons) can vary your existing trust deed to exclude distributions of income/capital to 'foreign persons', including where a beneficiary specifically named in the trust deed is a 'foreign person'.
Can I avoid foreign person surcharges simply by electing not to distribute to named beneficiaries in a given year?
No. Simply electing not to distribute to named beneficiaries in a given year will not assist if the relevant law assesses a trust according to whether a foreign person is merely named in the deed (or captured as a beneficiary).
What happens if a 'foreign person' is an appointor, trustee or director/shareholder of the trust?
This would mean that a 'foreign person' exercises control over the trust: whether as an appointor, trustee or director/shareholder of the trustee. Using the Cleardocs Deed of Variation (excluding foreign persons) product in order to vary who is an eligible beneficiary will not address these problems because the product does not prevent an appointor, trustee or director/shareholder of the trust from acting whilst they are a 'foreign person'. You will need to obtain legal advice.
When should vested entitlements in favour of a 'foreign person' beneficiary, if any, be paid?
You should also ensure that any vested entitlements in favour of a foreign person are paid by the trustee to that person before signing the Deed of Variation (excluding foreign persons): those entitlements could not be paid after the Deed of Variation is signed.
Should I apply for a ruling from the relevant revenue office in my state or territory, to seek confirmation that the trust is not a 'foreign trust'?
If you are unsure whether or not your trust is a 'Foreign Trust', you should consider applying for a ruling from the relevant revenue office in your state or territory, to seek confirmation that the trust is not a 'foreign trust'. If you do not obtain a ruling, it is possible that the revenue office may, or may at some time in the future, levy stamp duty and land tax at the higher surcharge rate that applies to 'foreign trusts'. Most revenue commissioners have a broad discretion when making these decision.
Can the clauses in the Deed be varied?
Once the Deed of Variation (excluding foreign persons) product is signed, the clauses which are included by the product cannot be varied in the future except in furtherance of the following purpose: to ensure that real property owned by the trust is not the subject of surcharge rates of tax in any jurisdiction in Australia.
What are the tax benefits of this product?
By ensuring your trust does not allow the distribution of capital/income to a 'Foreign Person' (and provided that your trust is not otherwise controlled by a 'foreign person' and does not name a 'foreign person' as a beneficiary) then the relevant revenue authority is unlikely to levy additional stamp duty and/or land tax at the higher surcharge rate that applies to 'foreign trusts': as noted above, a ruling must be obtained for certainty on this point.
The legal information and commentary on this site is general
only. Documents ordered through Cleardocs affect the user's
legal rights and liabilities. To assess their suitability for
the user, legal accounting and financial advice must be
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