A Singapore-administered trust, a Labuan foundation or a BVI holding company can be an entirely sensible vehicle for a family’s Australian assets. But Australian law looks through the vehicle in ways trustees do not always expect. The issues fall into three groups: holding Australian land, Australian residency of the trust itself, and beneficiaries who live in Australia.
1. Holding Australian land through an offshore structure
Foreign investment approval. A trust or company in which foreign persons hold a substantial interest is itself a “foreign person”. Acquisitions of Australian residential land need approval, and the ban on buying established dwellings, now running to 30 June 2029, applies to it. Changes of control of a land-holding entity, including on a trustee change or a share transfer within the family, can also need approval.
Register of foreign ownership. Foreign interests in Australian land must be registered with the ATO, and changes notified.
State surcharges. Foreign purchaser duty (8% in Victoria, 9% in New South Wales) and annual land tax surcharges (4% and 5%) apply to foreign trusts and companies. In Victoria, a discretionary trust can be foreign simply because the deed allows distributions to a foreign beneficiary.
Landholder duty. Transferring shares or units in an entity that owns Australian land can attract duty as if the land itself had been sold.
2. When the trust itself becomes Australian
For Australian tax purposes, a trust is generally resident if a trustee is resident in Australia or its central management and control is in Australia. This can happen without anyone intending it:
the settlor or patriarch moves to Australia and continues to direct the trustee’s decisions in practice;
a family member living in Australia is appointed as a co-trustee or a protector with real decision-making power;
trustee meetings are effectively held in Australia.
A resident trust can be taxed in Australia on worldwide income. Documented, genuine decision-making offshore is the main protection.
3. Beneficiaries living in Australia
When a beneficiary becomes an Australian resident, distributions from the offshore trust need care:
Distributions of income or gains accumulated in a non-resident trust can be taxed in the beneficiary’s hands under section 99B of the Income Tax Assessment Act 1936, with an interest charge on accumulated amounts. Distributions of genuine corpus are generally not taxed, but the trust’s records must prove the character of what was paid.
Loans to Australian-resident beneficiaries, and use of trust assets (such as a home owned by the trust), can be treated as distributions.
If an Australian resident has transferred property to a non-resident trust, the transferor trust rules can attribute the trust’s income to them.
These rules interact with the trust’s home jurisdiction and with the beneficiary’s own visa and residency status. We work alongside the trust’s tax advisers so the legal and tax positions are planned together.
Trust disputes with an Australian element
Where beneficiaries in Australia challenge a trustee, or Australian assets are at stake, a trustee may seek the Australian court’s directions. In Victoria, trustees can apply to the Supreme Court for advice on how to act, which protects a trustee who follows it. Mediation between beneficiaries is often faster and preserves family relationships.
A short review checklist for trustees
List every Australian asset the structure holds, directly or through subsidiaries.
Check FIRB approvals and ATO register entries are in place and current.
Review the deed for foreign beneficiary exclusions where Australian surcharges matter.
Identify any trustee, protector or controller who lives in Australia.
Keep clear records separating corpus from accumulated income.
Refer a matter. For a confidential review of a structure with Australian assets or beneficiaries, contact Justin Chua.
This article is general information only and is not legal or tax advice.
Sources: PwC — updated ATO guidance on section 99B · ATO — interest charge for beneficiaries of non-resident trusts
Related reading: Offshore Trusts with Australian Assets or Beneficiaries, the same issues from the family’s point of view.
More notes for private bankers, trustees and family offices: For Private Banks, Trust Companies and Family Offices.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal advice.
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