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Trust tax shake-up: NSW’s pledge stamp duty relief
NSW is proposing an Australian-first stamp duty relief scheme for trust restructures, as property investors weigh the tax consequences of the federal government’s proposed 30 per cent minimum rate.
The NSW government has pledged to introduce stamp duty relief for businesses and individuals restructuring their trusts under the federal government’s proposed tax changes, provided Labor wins the March state election.
NSW Treasurer Daniel Mookhey said the Minns government would legislate a rollover relief scheme allowing discretionary trusts to transition to the federal government’s transitional Excluded Election Trust (EET) arrangement without triggering stamp duty.
The changes would ensure trusts could transition to an EET without incurring stamp duty, removing a potential cost for businesses restructuring to avoid the proposed tax.
Mookhey said the proposal was an “Australian-first state-level rollover relief scheme”, following the release of the federal bill, which is expected to pass by the end of the year with Greens support.
After the budget, the federal government introduced a 30 per cent minimum tax rate on discretionary trusts, changing how income distributed to beneficiaries was taxed and potentially reducing the benefits available to property investors who use trusts to manage rental income.
Founder and consultant of Property Tax Specialists Shukri Barbara said the NSW government’s announcement was positive, but the benefits would depend on individual circumstances and whether restructuring was necessary.
“The only thing when people come to apply it is going to depend on what the property is, what the circumstances of the trust are, how much is the family and the splitting of income is available,” he said.
Under the changes following the Budget, trusts would see a minimum 30 per cent tax on net income, with beneficiaries receiving a tax offset for the amount already paid.
The changes could increase tax bills for property investors who previously reduced their overall tax by distributing rental income to family members on lower incomes.
Barbara said that, depending on circumstances, some investors could keep their existing trust structure without transferring their property.
“If you decide to nominate two beneficiaries who are going to receive distributions, mom and dad, for example, you don't have to change anything. You can keep the property in the trust,” he said.
However, Barbara said that electing fixed beneficiaries would limit investors’ ability to choose which eligible family members receive trust income each year.
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Before changing their trust structure, Barbara said investors should consider asset protection, family arrangements, estate planning and tax implications.
“The whole point of discretionary trusts is to have flexibility and asset protection.”
“If your whole family and beneficiaries of a trust are within that range of 30 per cent, then it doesn't really make a difference. You don't have to make any changes,” Barbara said.
Barbara said the implications could be more complex for businesses operating through trusts, where family employment, customer and supplier relationships, and future estate planning could influence structure decisions.
Treasurer Daniel Mookhey said the changes would give small businesses clarity.
“NSW needs small businesses to thrive. We want them to grow. We want them to hire more people. We don’t want them to worry that their state is trying to make a windfall gain at their expense.
He said that while the proposed stamp duty relief was welcome, investors should not assume every restructuring would qualify.
The NSW government said it planned to consult with small business representatives once federal legislation passes.
However, the state-level changes would not take effect until after the election.
The move also put pressure on other states to clarify whether they will impose stamp duty on trust restructures undertaken to establish fixed beneficiaries.
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