November 9, 2018

Please reload

Recent Posts

Changes to the ASX Listing Rules announced

October 17, 2019

Please reload

Featured Posts

WA Government announces lift in Foreign Purchaser Surcharge: Are you affected?

May 14, 2018

The WA Government has announced a lift in the previously foreshadowed foreign purchaser surcharge from 4 percent to 7 percent.


In the 2018-19 Budget speech, the WA Treasurer, Hon Ben Wyatt MLA, announced that the surcharge would now be at 7 percent to bring Western Australia in line with other States. 


The surcharge will commence from 1 January 2019 and apply on the dutiable value of residential property purchased by foreigners, including corporations and trusts, in Western Australia.


This surcharge is in addition to the transfer duty payable on property acquisitions.  The surcharge is restricted to residential property but excludes residential developments of ten or more properties, commercial residential property such as hotels, student accommodation and retirement villages, and mixed use properties that are used primarily for commercial purpose.


“Foreign” definition        


The WA Government has not yet tabled the proposed legislation detailing which entities will be considered foreign except for a broad statement that it will include persons, corporations and trusts.


New South Wales, South Australia, Queensland and Victoria have each separately introduced legislation implementing a foreign purchaser surcharge.   New South Wales and Victoria also have an annual Foreign Owner Land Tax Surcharge of up to 1.5% of the aggregate taxable value of the land.


South Australia, Queensland and Victoria have formed their own definitions for foreign persons, foreign corporations and foreign trusts whereas New South Wales has adopted the definitions within the Foreign Acquisitions and Takeovers Act 1975.


For example, South Australian legislation (broadly similar to Queensland and Victoria) provides the following definitions :

  • Foreign person - an individual who is not an Australian citizen, Australian permanent resident or a New Zealand citizen resident with a special category visa;

  • Foreign corporation

    • a corporation incorporated outside Australia; and

    • a corporation in which a foreign person, trustee for a foreign trust or group of foreign persons have a controlling interest of at least 50% of voting power or potential voting power or at least 50% of issued shares;

  • Foreign Trust - either a fixed trust where 50 per cent or more of capital of the trust property is held beneficially for one or more foreign persons; or a discretionary trust where a trustee, appointor, identified object, a beneficiary who takes capital in default is a foreign person.


New South Wales has adopted different definitions of a foreign person, corporation and trust:

  • foreign person - an individual that is not a citizen of Australia or not ordinarily a resident of Australia (in Australia for more than 200 days in the previous 12 months).

  • foreign corporation -a corporation in which an interest of 20% or more is owned by a foreign individual, corporation or governmentor where two or more foreign individuals, corporations or governments own an interest of 40% or more.

  • foreign trust - where a trustee of a trust has an interest of 20% or more that is held by a foreign individual, corporation or government or where atrustee of a trust in which two or more foreign individuals, corporations or governments hold an interest of 40% or more.


Accidental Foreign Trusts


The differing definitions for “foreign trusts” between the respective jurisdictions have ramifications for discretionary trusts where the trustee has a wide power to distribute income and/or capital to various classes of beneficiaries including various trusts, companies or charities.  


The significant differences are whether the interest in a trust arises through a default or potential beneficiary and whether the beneficial interest is in relation to the distribution of capital and/or income.  


The Queensland definition provides that the default beneficiary of a discretionary trust is deemed to have a trust interest equal to the percentage of trust income or property they would receive in default of trustee appointment. 


Victorian legislation states that any potential beneficiary is deemed to have a beneficial interest in the maximum percentage of capital of the trust that the trustee can distribute to them.


New South Wales however provides that a potential beneficiary of a discretionary trust is deemed to have a beneficial interest in the maximum percentage of income or property of the trust that the trustee can distribute to them. 


For trusts holding property, the definitions in each of these States may cause a discretionary trust to be deemed as a foreign trust where a potential beneficiary is or could be a foreign person. As referenced earlier, in the case of New South Wales and Victoria who have annual Foreign Owner Land Tax Surcharge, this has an ongoing cost.


What can you do?


The definition of “foreign trust” to be used in the Western Australian legislation has not yet been announced however trust deeds should be reviewed to determine if any of trust beneficiaries could be deemed as foreign.


We expect the proposed legislation in Western Australia to be tabled in the coming weeks.



Opportuna Legal communications are intended to provide commentary and general information. They should not be relied upon as legal advice. If you would like further information in relation to this matter or other legal matters please contact Opportuna Legal.


Share on Facebook
Share on Twitter
Please reload

Follow Us
Search By Tags
Please reload

  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square

(08) 6110 3748  |   Level 4, 45 St Georges Terrace Perth Western Australia 6000

Liability limited by a scheme approved under Professional Standards Legislation