Despite coming into effect just over a year ago, many trustees of discretionary trusts may not be aware of their new obligations to avoid paying surcharge reserved for foreign beneficiaries. The amendments to both the Duties Act 1997 and the Land Tax Act 1956, which were enacted on 24 June 2020, consider all trustees of discretionary trusts (including ordinary family and testamentary trusts) to be foreign unless the trust has been amended to expressly preclude foreign persons from being a beneficiary.  If this variation has not been completed, a beneficiary, regardless of whether they are foreign or not, will be subject to the following surcharges on any residential properties under the trust:

  • Surcharge purchaser duty: 8% of the market value of the property
  • Surcharge of land tax: 2% of the unimproved value of land

One area unaffected by the changes are any testamentary trusts created prior to the end of the grace period (31 December 2020). Any created since that date will have to adhere to the new rules.

It is imperative that any trustees who have not made this variation to consult their legal advisor if they want to avoid a nasty surcharge on their residential properties. Contact Jackie Caspers ( for assistance.

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