Free Variation of Discretionary Trust (Excluding Foreign Beneficiaries) templates (Australia)

Adopt a Variation of Discretionary Trust to exclude foreign persons so that they are not liable for state property taxes.

Variation of discretionary trust

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State laws in Australia have introduced taxes of up to 8% for foreign residents or entities who hold or acquire interests in property through a discretionary trust. A variation of discretionary trust document allows you to vary a trust deed to legally exclude foreign beneficiaries.

We've put together a guide to writing a deed of variation and where to find a free template to help you get started.

What is a Variation of Discretionary Trust?

A deed of variation document amends a discretionary trust to exclude foreign persons from receiving distributions of income or capital so that they are not liable for state property taxes. A "foreign person" – either a non-resident or foreign corporation – is defined by the Land Tax, Duties and Foreign Acquisitions and Takeovers Acts in various states. The variation is permanent and cannot be reversed in the future.

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If the discretionary trust already contains named or specified foreign beneficiaries, you do need to consult a lawyer to have a custom document drafted as they cannot be excluded by a deed of variation. If the trust does not have named foreign beneficiaries, it is still useful to consult a lawyer to make sure that foreign persons are excluded from the trust. It is especially necessary in states like Victoria where a trust is automatically considered a foreign trust without an explicit exclusion.

If you are not sure whether your trust is recognised under state law as a "foreign trust", you can apply for a ruling from your state or territory's revenue office.

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When should I use a Variation of Discretionary Trust?

You can use a deed of variation when you want to update your trust to exclude any foreign person who has not already been named as a beneficiary of the trust. This will prevent the foreign person from being liable for the following state taxes for land purchases and ownership:

  • Surcharge Land Tax (New South Wales)
  • Surcharge Purchaser Duty (New South Wales, South Australia, Western Australia)
  • Foreign Person Additional Duty (Victoria)
  • Foreign Investor Duty Surcharge (Tasmania)

From 1 March 2020, any discretionary trust in Victoria that does not specifically exclude foreign persons is automatically considered a foreign trust. You should be aware that a foreign person who has already been named a beneficiary is not excluded in a deed of variation.

What does a Variation of Discretionary Trust (Exclude Foreign Persons) include and not include?

A deed of variation defines a "foreign person" and includes an explicit clause that excludes foreign persons from becoming trust beneficiaries. It does not include persons that have already become beneficiaries.

What is included?

A variation of discretionary trust is a specific document that includes the following details:

  • Name, date and registration of the trust
  • Background of the agreement
  • Definition of "foreign persons"
  • Name and address of appointor
  • Name and address of appointees
  • Terms of the variation of trust
  • Consent of appointor
  • Date the variation becomes effective

What's not included?

The deed of variation does not include distributions to an appointee of a foreign person before the date it comes into effect. A variation of trust document cannot exclude a foreign person that has already been named as a beneficiary of the trust.

How effective is a Variation of Discretionary Trust (Exclude Foreign Persons)?

As the law in states such as Victoria charges taxes based on the status of a discretionary trust, a deed of variation is specifically required to remove liability for taxes applicable to foreign persons.

How do I write a Variation of Discretionary Trust (Exclude Foreign Persons)?

A deed of variation should be written in concise language that makes it clear foreign persons are excluded from being beneficiaries of the trust. You can use a legal template to make sure the document is legally binding and save you from writing it from scratch if you are unsure of the wording you should use.

  • Lawpath. Lawpath is an online legal resource for small businesses and entrepreneurs. You can browse free samples on the website, but you must sign up to a monthly plan to customise any document – including a deed of variation.
  • Cleardocs. Cleardocs offers a range of legal resources and access to advice from lawyers at law firm Maddocks. Users can register for free but need to pay a one-time fee for documents such as a deed of variation that costs $225.50.
  • Seed Legal. Seed Legal is a business law firm that carries a range of documents on its website, including a variation of discretionary trust. Users can browse free samples on the website, but to download and customise the deed you need to pay a one-time fee of $90.
  • Topdocs. Topdocs offers a range of online documents and includes legal review services for important documents. You can download free checklists of what should be included in variation of discretionary and hybrid trusts to exclude foreign persons. You can purchase a package of documents including a tailored deed, legal review and sign off for a one-time fee of $550.
  • Abbots. Abbots provides company registration and trust documents on its website. You can download a package to update your discretionary trust with a deed to exclude foreign persons, with a one-time fee starting at $220.

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