Many offshore trusts administered in Singapore, Hong Kong, Labuan or elsewhere now hold an apartment in Melbourne, a house in Sydney or a portfolio of Australian shares. Others have beneficiaries who have moved to Australia to study, work or retire. The trust deed may say nothing about Australia, but Australian law can still create ongoing obligations for the trustee and for the beneficiaries.
This article is written for trustees, trust officers and family offices. It explains, in general terms, the Australian compliance touchpoints that commonly arise, and the questions worth asking each year. Our separate articles on family office issues and section 99B are referred to where relevant.
Australian property held by an offshore trustee
Foreign investment approval and conditions
A trustee may be a foreign person for foreign investment purposes because of who the trustee is, or because of who holds interests in the trust. Acquiring an interest in Australian land may then need approval, and approval often comes with conditions. A temporary ban on foreign purchases of established dwellings also applies, subject to limited exceptions. Conditions continue after purchase, so the trustee needs to know what was promised.
Annual vacancy fee returns
Where foreign investment approval was obtained for a residential dwelling, or it was bought under certain exemption certificates, the foreign owner may need to lodge a vacancy fee return with the ATO for each vacancy year, even if the property was occupied. A fee may be payable if the dwelling was not occupied or genuinely available for rent for enough of the year. Failing to lodge can itself lead to a fee or penalties.
The Register of Foreign Ownership of Australian Assets
Since 1 July 2023, the ATO has administered a single register of foreign ownership of Australian assets, covering residential, commercial and agricultural land and other interests. Foreign persons may need to give notice of certain acquisitions, disposals and changes, including in some cases where no approval was needed. These can be overlooked when a trustee changes.
State duty and land tax surcharges
The states impose additional duty on foreign purchasers of residential property and surcharge land tax on foreign or absentee owners. Whether a trust is treated as foreign depends on the type of trust, its beneficiaries and, for discretionary trusts, the terms of the deed. In NSW, for example, the revenue office looks at whether the deed irrevocably excludes foreign persons. The rules differ from state to state.
Rental income and tax returns
Australian rental income is generally taxable in Australia even when the owner is foreign. An offshore trustee earning Australian rent may need to lodge an Australian tax return, and the tax position can depend on whether beneficiaries are entitled to the income and where they are resident.
Selling Australian property
Under the foreign resident capital gains withholding rules, a purchaser may need to withhold an amount from the price and pay it to the ATO unless a valid clearance certificate is provided. Clearance certificates are for Australian-resident vendors, so an offshore trustee is unlikely to have one, and the withholding and how it is later credited are worth considering before the sale.
Australian shares and investments
Australian payers generally withhold tax from interest and unfranked dividends paid to foreign residents. The rate depends on the type of payment and any tax treaty, and the payer needs accurate residency and address details. How that income is treated when later passed to Australian beneficiaries is a separate question.
Australian-resident beneficiaries
Distributions and section 99B
When a foreign trust pays an amount to an Australian-resident beneficiary, section 99B of the Income Tax Assessment Act 1936 may include part of it in the beneficiary’s assessable income. Amounts representing original capital or certain other sources may be treated differently, so trust records showing the source of each distribution can be important. Our separate article on section 99B explains this further.
Use of trust property
Allowing an Australian-resident beneficiary to live rent-free in a trust property, or to use other trust assets, may have Australian tax consequences. Our separate article on rent-free trust property discusses this.
Where the trust is resident
A trust may be an Australian resident trust if a trustee is resident or if central management and control is in Australia. Where trustee decisions are in practice made in Australia, or an Australian-resident protector or family member effectively directs the trustee, the trust’s status may be at risk. Our article on family office issues covers this.
Reporting
CRS
Under the Common Reporting Standard, an offshore trustee that is a reporting financial institution generally reports in its own jurisdiction on account holders and controlling persons, which can include settlors, protectors and beneficiaries. The ATO receives information about Australian residents from other countries’ tax authorities and uses it to check compliance.
Beneficiaries’ Australian tax returns
Australian residents are generally taxed on worldwide income, and beneficiaries may need to report foreign trust distributions and other foreign income in their own returns. A beneficiary often cannot do this correctly without information from the trustee.
AML/CTF and source-of-funds requests
Australian banks, and from 1 July 2026 certain lawyers, accountants and real estate agents, have customer due diligence obligations. When an offshore trust or its beneficiaries move money into Australia, buy property or open accounts, they may be asked for the trust deed, details of the trustee and controlling persons, and evidence of the source of funds and wealth. Clear, organised trust records make these requests easier to meet.
Questions for the trustee each year
- Which Australian assets does the trust hold, directly or through companies?
- Are all foreign investment conditions, vacancy fee returns and register notices up to date?
- Has any change in beneficiaries, trustee or deed affected the trust’s foreign status for state surcharges?
- Which beneficiaries are now Australian residents, and what information will they need for their tax returns?
- Do our records show the source of each distribution?
- Where are trustee decisions actually made, and who influences them?
How we work with offshore trustees and family offices
- We regularly advise on the Australian side of offshore trust structures, working alongside the trustee and the family’s lawyers in the trust’s home jurisdiction, who advise on that jurisdiction’s law. Our scope letter sets this out at the start.
- We treat confidentiality as central, and agree how information is shared with beneficiaries and other advisers.
- We can provide one point of contact and a periodic review that fits the trustee’s own review cycle.
- We advise in English, Mandarin and Cantonese, and the firm’s notary public assists with documents for use overseas.
- We work with lawyers and advisers in Singapore, Malaysia, Hong Kong, mainland China, Taiwan and Indonesia, and with registered tax agents in Australia.
- Justin Chua trained in accounting (Bachelor of Commerce, accounting major), is an affiliate member of STEP (the Society of Trust and Estate Practitioners), and advises on the legal and tax structure of family wealth together. He is a Nationally Accredited Mediator and FDRP, and an Accredited Family Business Advisor.
Frequently asked questions
Does an offshore trust need FIRB approval to buy Australian property?
It may, depending on who the trustee is, who holds interests in the trust and the type of property. Approval can carry conditions that continue after purchase. This needs to be checked before any contract is signed.
What are a foreign trustee’s obligations to Australian beneficiaries?
The trustee’s duties come from the deed and the law that governs the trust, but Australian tax law affects how distributions are taxed in the beneficiaries’ hands. Good records of the source of each distribution, and timely information to beneficiaries, can matter a great deal.
Does the ATO know about offshore trusts with Australian beneficiaries?
Often, yes. Through CRS and other exchanges, the ATO receives information from overseas tax authorities about Australian residents, including in some cases as controlling persons of trusts.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates, practising since 1990, assists offshore trustees and family offices to identify and manage the Australian side of their trusts. We review Australian property holdings against foreign investment, register and state surcharge requirements, help trustees understand how Australian-resident beneficiaries are affected, and prepare the documents and records needed when banks and other institutions ask questions. We work with the trust’s accountants and registered tax agents, and assist clients across Australia and overseas.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
Related reading
Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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