Improperly Drafted Exclusionary Clause Triggers Foreign Land Tax Surcharge For Discretionary Trust
This ruling from the New South Wales Civil and Administrative Tribunal (the Tribunal) serves as an important reminder for ensuring that discretionary trust deeds are appropriately amended to prevent the activation of "foreign" land transfer (stamp) duty and land tax surcharges
![Baullo v Commissioner of State Revenue [2023] VCAT 1164: Beneficiary Loans, Land Transfer Duty, and Discretionary Trusts](https://images.squarespace-cdn.com/content/v1/62940022bdc06b31c5ba0c30/1703029768199-5GRBFUR1AY23KZ8PO114/pexels-maria-orlova-4940760.jpg)
Baullo v Commissioner of State Revenue [2023] VCAT 1164: Beneficiary Loans, Land Transfer Duty, and Discretionary Trusts
The VCAT ruling of Baullo v Commissioner of State Revenue [2023] VCAT 1164 (Baullo), has reaffirmed the position of the State Revenue Office (SRO) that forgiving beneficiary loans in relation to a distribution of property from a discretionary trust to a beneficiary will prohibit utilisation of the exemption to land transfer (stamp) duty afforded by section 36A of the Duties Act 2000 (Act).
Stamp duty exemption - transfer from discretionary trust to beneficiary
Ordinarily, land transfer duty (stamp duty) is paid by the transferee at the time of the transfer of dutiable property, such as real property, unless an exemption to stamp duty is applicable.
The ATO’s Stance on Capital Gains, Discretionary Trusts and Foreign Residents
In the decisions of Greensill (Thawley J) and Martin (Steward J), the Federal Court found in favour of the Australian Taxation Office (ATO) that section 855-10 of the Income Tax Assessment Act 1997 (ITAA 1997) did not disregard a non-taxable Australian property capital gain distributed to a foreign beneficiary of an Australian discretionary trust.