Currently before the Legislative Council, Budget Measures Bill 2017 will potentially impose more than just a major bank levy. One major amendment to the Stamp Duties Act 1923 is the insertion of a stamp duty surcharge for foreign purchasers of residential land (proposed s 72 of the Stamp Duties Act). The amount of the surcharge is 4% of the value of the interest acquired and is in addition to the duty already payable on the transaction. This takes the maximum rate of duty to 9.5% of the value of the transaction. The move to implement a surcharge mirrors the action taken by State Revenue Offices in Victoria (7% surcharge), New South Wales (4%) and Queensland (3%). Of particular concern is the classification of a “foreign purchaser”, which includes a foreign person, a foreign corporation or a foreign trust. A foreign trust is a fixed trust where a foreign person(s) have a total beneficial interest of greater than 50% of the capital of the trust or a discretionary trust where one or more of the following is a foreign person:

1. A trustee;
2. A person who has the power to appoint under the trust;
3. An identified object under the trust;
4. A person who takes capital of the trust property in default

We see a potential for trusts to be inadvertently classed as foreign trusts, by virtue of (3) and (4) in particular. Significantly, a trust may be classified as foreign even where foreign beneficiaries have not received any distributions of income or capital. Advisers are urged to reassess trust deeds which may incidentally include a potential foreign beneficiary before clients purchase residential land. Advisers should also be aware of the Foreign Owner Land Tax surcharge implemented in NSW (2% surcharge), Victoria (1.5%) and Queensland’s 1.5% surcharge on absentee individuals, which although not currently, may be a future legislative measure implemented in South Australia.