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Land TaxSeveral changes have come into effect in the last 6 months for Eastern seaboard states relating to additional transfer (stamp) duty and land tax applicable to property with foreign holders.  The definition of a ‘foreign person’ varies from state to state but can capture entities that have a minority interest held by foreign party.  Trusts with foreign beneficiaries are most at risk of falling into a foreign person definition.  Action can be taken to protect against additional duties being levied.


Additional Transfer (Stamp) Duty for purchasers of residential real estate by foreign persons

Over the last 2 years, the East coast State Governments have sought to apply an additional transfer (stamp) duty to foreign purchasers of residential property.


Victoria led the way imposing Foreign Purchaser Additional Duty (FPAD) of an additional 3% duty from 1 July 2015 which rose to 7% from 1 July 2016.  New South Wales imposes an additional 4% surcharge purchaser duty (from 21 June 2016).  Queensland imposes an additional 3% Additional Foreign Acquirer Duty (AFAD) from 1 October 2016.


The law in each State broadly applies to a purchase of residential property (vacant land zoned as residential, house and land, or apartments) by a foreign person.


Foreign Person

Each State has different definitions of foreign person.



For individuals, citizens, permanent residents and New Zealand citizens holding special category (444) visas are considered exempt.



A company is classified as Foreign as follows:

  • NSW – Foreign Companies, or Australian companies where foreign persons hold a substantial (20%) interest
  • QLD and VIC – Foreign Companies, or Australian companies where foreign persons have a 50% (Qld), or >50% (VIC) interest in the company.



A trust is classified as Foreign as follows:

  • NSW:  A foreign trust, or an Australian trust in which a foreign person holds a substantial interest (20%), or where 2 or more foreign persons hold an aggregate interest of at least 40%.  Any foreign beneficiary of a discretionary trust will be deemed to hold a maximum interest.
  • VIC: A trust where >50% of the trust interests are held by foreign persons.   Any foreign beneficiary of a discretionary trust will be deemed to hold a maximum interest.
  • QLD: A trust where 50% of the trust interests are held by foreign persons.  For discretionary trusts, if at least 50% of the takers in default (default beneficiaries) are foreigners, then the trust will be a foreign trust.


What this means is that people seeking to purchase properties in NSW, QLD or VIC need to carefully review their existing trust deeds before contracting to purchase a property in their trust.


Potentially, in NSW and VIC, having a relative overseas as a potential beneficiary of a trust (often a secondary beneficiary) can cause the trust to be a foreign trust for the purpose of these rules.  Therefore this additional foreign purchaser duty can apply to ‘Australian’ trusts.


Additional Land Tax

In addition to the above increase in duty on new acquisitions of property, NSW and VIC have commenced imposing additional land tax.


NSW apply an additional 0.75% land tax to foreign holders of residential land from midnight on 31 December 2016, while VIC will apply an additional 1.5% to all land subject to land tax in Victoria from 1 January 2017.


Action Required by Trustees:

We recommend that all trustees should review their existing trust deeds to consider whether there is a current exposure to additional land tax in NSW and VIC.  If exposure exists, consider updating the deed to have a clause to prohibit distributions to foreign residents (be careful to ensure this does not cause a resettlement of the trust).


For prospective property acquisitions, again review the trust deed and consider updating the deed to have a clause to prohibit distributions to foreign residents, or establish a new discretionary trust which automatically prohibits distributions to foreign persons.


The NSW Government has recently announced they will apply retrospective affect to amendments to trust deeds to remove the power to distribute to a foreign person back to 21 June 2016.  However, the amendment must occur within 6 months.


Many times in the past, Queensland has followed the lead of the Southern States, so the Queensland Government may seek to introduce a land tax surcharge for foreign owners in the 2017/18 State budget due to be handed down in June 2017.

Trusts with Queensland properties with potential foreign beneficiaries may wish to take pre-emptive action to exclude the foreign beneficiaries to avoid any potential future land tax surcharge.

Should you require further information or require assistance to review your trust deeds, please contact your usual Hanrick Curran adviser or call Jamie Towers on 07 3218 3900.



Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.