Trusts to avoid surcharge land tax in NSW – December 2020 deadline

Surcharge land tax applies to foreign persons who are owners of residential land in NSW.   The law has been in place for several years.

Where residential land is owned by a discretionary trust, the trustee will be liable for the surcharge land tax each year if there is no provision in the trust deed, by 31 December 2020,  to provide that:

  1. No potential beneficiary of the trust is a foreign person; and
  2. The terms of the trust must not be capable of amendment in a manner that result in a foreign person being a potential beneficiary.

In addition any named foreign person in the trust deed must be removed as beneficiary.

This requirement applies even if the trust has no apparent foreign beneficiary or potential foreign beneficiary.

The surcharge amount is 2% of the unimproved value of the residential land.  It is in addition to annual land tax liability.

Who is a foreign person?

I think it’s easier to explain who is NOT a foreign person.   According to the NSW Duties Act 1997 a foreign person is NOT:

  • an Australian citizen, regardless of whether they live in Australia or elsewhere.
  • An individual who is ordinarily resident in Australia, that means
    • has actually been in Australia for 200 or more days in the period of 12 months immediately preceding that time; and
    • There is no limitation as to time they can stay in Australia as imposed by law.
  • A New Zealand citizen who holds a special category visa, within the meaning of section 32 of the Migration Act 1958.

A company beneficiary of a trust may be a foreign person if a shareholder of the company is a foreign person and has a substantial interest.

What is to be done?

Many trust deeds have already been amended as a December 2019 deadline was envisaged but legislation failed to pass in time.

Care must be taken when amending a trust deed by a solicitor that the amendment clause is strictly followed.    On request, Linda Alexander Law (email; will provide you with an order form and fee estimate to attend to the amendment.

Any surcharge duty already paid by a trust will be refunded by the NSW Revenue if these amendments are in place by midnight on 31 December 2020.

The Commissioner of State Revenue issued an updated practice note on this issue on 1 July 2020, see

Similar rules apply when a discretionary trust buys residential property in NSW.  An 8% purchaser surcharge duty in addition to stamp duty will be payable unless these amendments to the trust deed are in place.