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Trustees Beware – How to Avoid an Extra 8% in Stamp Duty

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By Devin Elliott, Law Graduate

As of March 2020, the Victorian State Revenue Office will treat all discretionary trusts (including family discretionary trusts) as foreign trusts if the discretionary trust has any potential foreign beneficiary.

Trustees of discretionary trusts intending to acquire residential property for the trust may inadvertently find themselves being required to pay an additional 8% in stamp duty.

As these changes have already come into effect it is imperative that any trust deeds yet to be amended are promptly changed to exclude foreign beneficiaries before the settlement date of any residential property acquisitions, thereby avoiding classification as a foreign trust and the additional 8% stamp duty which comes with it.

Failure to do so could be the difference between paying $110,000 in 5.5% stamp duty for a residential property with a dutiable value of $2,000,000 and paying $270,000 in stamp duty for the same property due to the 8% foreign purchaser additional duty (figures calculated using the State Revenue Office’s Land Transfer (Stamp) Duty Calculator).

Trustees should also be aware that contracts for the purchase of Victorian residential property with a dutiable value of up to $1,000,000 may be eligible for a 50% stamp duty waiver if they were signed on or after 25 November 2020 and before 1 July 2021.

While it is possible for foreign discretionary trusts to benefit from this 50% stamp duty waiver, it will only apply to the normal stamp duty rate not to any foreign purchaser additional duty which may be payable on the transfer of property.

If you have any questions or need assistance with amending the terms of a trust deed to avoid foreign purchaser additional duty, please contact John Sier on (03) 8540 0200 or at john.sier@mst.com.au.