Included/Excluded Trust Deals

The exclusion of foreign beneficiaries from trusts



What is “residential property”?

The definition of “residential property” varies between the states but, broadly, it includes:-

  • residential apartments and houses, and
  • property capable of being used for residential purposes.


How does Castle approach this situation?

Our excluded deeds for new discretionary trusts impose a temporary prohibition on the distribution of income and capital to foreign beneficiaries while the trust is the owner of residential land. Therefore, the relevant beneficiary class is not permanently removed and we believe that the variation cannot be held to amount to a resettlement as the variation is merely a temporary restriction on the trustee’s power to distribute to foreign beneficiaries.

We believe this is the safest method of eliminating the surcharge and, to date, there has been no feedback from the many clients using our trust deeds, that this method was not accepted by the various State Revenue offices.

When forming a new discretionary trust, you will be asked to nominate whether your clients want:-

  • an included deed, where there is no temporary prohibition imposed on distributions to foreign beneficiaries. This type of trust is useful when:-

(a) your clients are not likely to invest in residential property,  or

(b) when your clients wish to make distributions to foreign beneficiaries and are willing to pay the surcharges;

  • an “excluded deed, where there are provisions which impose a temporary prohibition on the distribution to foreign beneficiaries. This is suitable for clients who:-

(a) intend to invest in residential property in those jurisdictions which impose surcharges and

(b) do not wish to pay these surcharges.


What should be done with an existing discretionary trust deed?


If a client intends to use their existing discretionary trust to acquire property that is, or will become, residential property, your client may wish to avoid the surcharges. If so, the deed should be varied.

If the client wishes to make distributions to foreign individuals, foreign companies or foreign trusts, the deed will probably not need to be varied, but the surcharges will apply.

Docscentre Legal can provide you with a Deed of Variation for a fixed fee of:-

  • $330.00 if the deed to be varied was originally supplied by Castle; or
  • $550.00 if the deed to be varied was not originally supplied by Castle.


What is the risk of re-settlement?

It is not yet possible to determine whether the removal of certain classes of beneficiaries constitutes a re-settlement of the trust. There has been no case law in relation to changes of this kind to guide us.

However, by imposing a conditional restriction on the trustee to prohibit making a distribution to foreign beneficiaries, and thus not actually removing beneficiaries, we believe that the trust will not be seen to be re-settled.


Current surcharge rates

Jurisdiction Transfer Duty Date Introduced Land Tax Relief for Foreign Developers
Victoria 8% 1 Jul 2015 2% Yes
New South Wales 8% 21 Jun 2016 2% Yes
Queensland 7% 1 Oct 2016 1.5% Yes
South Australia 7% 1 Jan 2018 Nil No
Western Australia 7% 1 Jan 2019 Nil Yes


  • The above table is for general information and should not be relied upon for any purpose.


If you would like any further help with this matter, please call us on 03 9898 6666.