Duty surcharges for foreign purchasers of land

Foreign duty surcharge rules were introduced in 2016 and apply to land acquired for residential purposes. The rules impose additional stamp duty and land tax on foreign persons purchasing and holding real estate in Australia.

The terms ‘foreign person’ can apply to trusts acquiring land in Australia. If a foreign person will be involved in the conduct of the trust, is a beneficiary of the trust or is related to a person who has a beneficial interest in the trust, then the trust may be liable for additional stamp duty and land tax.

The amount of the surcharge varies from State to State, between 3%-7% for additional stamp duty and up to 1.5% pa for additional land tax.

Annual charge on foreign owners of underutilised residential property

When the Federal budget was handed down on 9 May 2017, the Government announced it will introduce a levy on non-resident property owners. The levy will apply where the property is either unoccupied or genuinely not available on the rental market for at least 6 months a year.

The objective is to encourage foreign owners to make their properties available for rent, increasing the supply of residential housing in Australia.

The annual levy will be equivalent to the relevant foreign investment application fee imposed on the property at the time it was acquired.

Trust distributions & trustee resolutions deadline: 30 June

Trust income must generally be distributed to beneficiaries before the end of the income year (30 June). This raises a number of considerations including:

• the importance of planning for year-end trust distributions.

• the need for trustees to check the terms of the trust deed and ensure they make valid distributions. This is highlighted in BRK (Bris) Pty Ltd v FCT 2001 ACT 4111 which is discussed by Maddocks lawyers in a recent ClearLaw article.
• ensuring trustee resolutions are effective.

What’s next?

Ensure all your family trust documents comply with and take advantage of relevant laws.

Cleardocs offer a wide range of automated trust solutions including creation of effective meeting minutes and a family trust set up with the option to exclude foreign persons. Cleardocs partners with Maddocks, a top 20 Australian law firm.

Cleardocs users experience legal document creation time-saving benefits like:

• 24/7 access to over 200 documents;
• an online interface that’s intuitive and easy to use;
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• the ability to create, manage and store your documents in the cloud.

Please call Cleardocs on 1300 307 343 to get started.