Since 1 July 2015, the Victorian State Revenue Office has charged additional stamp duty for foreign purchasers, known as ‘Foreign Purchaser Additional Duty’ (FPAD). A trust may be subject to FPAD where the trust is involved either in the purchase of residential property or land that is later intended for residential use. The FPAD must be paid in addition to the usual stamp duty and is currently calculated at 8% of the purchase price.
The State Revenue Office recently changed its approach to FPAD, and now views discretionary trusts as a ‘foreign’ trust unless the trust deed specifically excludes foreign beneficiaries.
With this change in approach, regardless of whether any beneficiaries are in fact foreign or not, most discretionary trusts will now be treated as being foreign trusts and liable to pay FPAD when acquiring residential property.
In addition, if a trust is held to be a foreign trust, an additional annual land tax surcharge will apply. This is called the absentee owner surcharge. This surcharge is currently 2% and is in addition to the general and trust surcharge rates.
We are currently working through our list of clients who may be affected by this change of approach and will be in contact shortly to advise an appropriate course of action.