In July 2018 the Tasmanian government introduced the Foreign Investor Duty Surcharge (FIDS) which is charged when residential or primary production property (farming property) is purchased by a foreign person.
Currently a foreign person is charged an additional 3% duty on the purchase of a residential property and 0.5% on the purchase of a primary production property.
Rate Increase - 1 January 2020
From 1 January 2020 a foreign person will be charged an additional 7% duty on the purchase of a residential property and 1.5% on the purchase of a primary production property. The increases are subject to the relevant legislation being passed through the Tasmanian State Parliament.
Discretionary Trusts (often referred to as ‘Family Trusts’) and other forms of trusts can be considered ‘foreign’ under the existing legislation. This is because the trustee of a trust often has the potential to distribute to any family member or associated company, including members that are not Australian.
The State Revenue Office automatically classes family trusts as foreign and being subject to FIDS. If your trust has no intention of distributing to foreign persons it is important to make sure that your trust specifically restricts the trustee from distributing to a foreign person.
It is very likely that discretionary trusts that have been created prior to July 2018 will be considered to be a foreign trust by the SRO. Often, but not always, this can be fixed by varying the trust.
If you are considering purchasing property in Tasmania using an existing trust, your should engage your solicitor to review your trust to see if any variations are required. On occasion, it may not be possible to vary the trust and a new entity must be set up or the additional duty will be required to be paid.
Cormiston Legal can assist with the review of your trust and prepare a deed of variation if required or set up a new trust.
The above information is general information from Cormiston Legal and you can contact us on 03 6332 9353 or use our contact us form at - https://www.cormistonlegal.com.au/contact-us if you require our assistance.