Surcharge Traps

If you have clients who are not Australian citizens, it is important to understand when they will be liable to pay surcharge purchase or duty or surcharge land tax. Post Julian Morrow chats with Barrister Andrew Ryder about some of the trickier aspects of surcharge duty and land tax and tips for avoiding traps and giving the right advice at the right time. Welcome to Risk on Air, I'm Julian Morrow and today we're talking about SPD and SLT traps with Barrister Andrew Ryder, listed by Doyle's Guide as a leading tax barrister in Australia, Andrew also edits Australian stamp duties law and writes the national stamp duty section of the online service, practical guidance, property law. Andrew, thanks very much for joining us on Risk on Air.

Thanks for having me Julian. Now let's get down to the basics Andrew SPD and SLT before we talk about the traps, what are the acronyms me? Surcharge purchase of duty and surcharge land tax. And why is this a subject that we're discussing on Risk on Air law covers podcast?

Well, since both taxes were introduced in 2016 they've been the cause of fraud, I understand unprecedented numbers of claims and also the quantum of the claims where solicitors have been found to have incorrectly advised their clients on their liability or otherwise to the two surcharge taxes. So it does sound like that word traps in the title is well placed. Could you just run us through what the two pieces of legislation did, what the surcharge purchase of duty is and what the surcharge land tax is? And imagine stepping through some of that detail will perhaps map out the minefield for us.

Yeah, absolutely. In 2016 the NSW government introduced the surcharge purchase of duty. So for the first time in NSW we had a special additional tax. It's like a stamp duty but it's an additional stamp duty.

It's a foreign person and it's only for resident for land in NSW. When the tax first came in, it was sort of seen as a bit of a novelty. I think people had really drilled into the detail and understood the traps there were in trying to work out whether somebody was foreign. So essentially the test of foreign is either not an Australian citizen or you're not a permanent resident or you are a permanent resident but you haven't satisfied the 200 days in the last year test.

So just to flesh that out a bit, permanent residents to escape the surcharge when they purchase the incident in NSW before exchange and also before completion which is when the transfer happens. They have to have been in Australia for 200 days, not continuously but 200 days in the year before exchange and also before completion. That's obviously just talking about natural persons, individuals or in person is a very wide concept it includes companies and it includes trusts, specifically discretionary trusts, although it does include all trusts. The trap with discretionary trusts was that because a lot of the definitions come from the third or foreign investment review board legislation which nobody reads and in fact nobody can understand, then you find that people don't appreciate that it only takes one potential beneficiary of a discretionary trust to actually make the trustee a foreign person.

But in any event the legislation was amended in 2020 retrospectively too so that now the position is that every trustee of every discretionary trust that holds residential land in NSW is considered to be a foreign person unless there's an irrevocable prohibition in the trustee on any foreign person being a beneficiary with a take or default or discretionary object or both. So it was the foreigners of people that was not I think being picked up either by the purchases themselves or their solicitors. There's been a lot of confusion about when a visa type makes someone a permanent resident. Generally speaking a permanent resident has got no time limit on when they can stay in Australia.

Bridging visas I think are one of the big areas that has been and will continue to be an issue because it's a little bit strange the wording of the conditions to do with a visa doesn't jump out of you that someone's not time limited but in fact they are because they're here I think until the minister exercises discretion so it's not in fact an unlimited time period. So this is where the problems have arisen. The problems all come from these forms that people fill in they're called purchase and decorations and for individuals they're not Australian citizen then there's a question are you a permanent resident. And I think people have been confused either because of their visa type or because they're confusing them with a federal tax concept which is a tax resident which is a different test altogether or they haven't read the test that not only do they have to be a permanent resident they have to satisfy the 200 days in the year before exchange or completion of the purchase of the residential land.

And just on the year there is that's calendar year or for actually calendar year. So that's where it started off really with individuals but now revenue through this surcharge purchase of duty compliance campaign. And this is a well funded campaign that there was a line item in the NSW budget a few years ago allocating specific funds to the audits where they expected that as a result of undisclosed liabilities and their audits they were going to be collecting an additional $200 million over four years. And the thing about it is a lot of these properties are high value properties and where the surcharge liability is sometimes it's in the millions of dollars plus there's always at least 25% penalty banks and a very high rate of interest typically north of about 12 to 14% per annum.

So it's a high stakes game of very technical definitions very important to be cautious and clear on advising clients. Yeah absolutely and the problem is I think clients aren't either giving the right instructions to their lawyers or the lawyers aren't asking the right questions about particularly the visa type that they have or just taking it a face value. It's pretty easy to tell when someone's an Australian citizen you ask for their passport and it will say whether they are an Australian citizen. With permanent resident if the lawyers are just asking are you one are you a permanent resident they're not going behind what their visa type is now a few years back revenue did amend or augment the notes explanatory notes they have to their surcharge purchase the declarations.

And I think from every there's a table right at the front of those explanatory notes where it talks about common visa types and whether they do or don't make somebody a permanent resident. But I got to say one thing that's a bit bizarre with one of the visa types and it's a pretty common one it's to do with New Zealanders and they accept class 444 visas so get this. While they hold that type of visa for four and they're in Australia they're considered to be a permanent resident as soon as they pass her immigration to go overseas and leave Australia they become a foreign person. But when they return to Australia they again become a permanent resident.

So is it a common trap? Well I've seen it enough that yes it is. The first time I became aware of it New Zealand lady with one of these visas was about to exchange on some residential property in New South Wales she must have given authority for someone to sign on her behalf. Well she left the country before exchange she was a foreign person at the time of exchange so she was absolutely toast.

And I think she was also she stayed out of the country until completion so she was a foreign person at completion because you actually test surcharge per to the duty at exchange and completion. Give us that point again so you test it at exchange and completion. So you need to be very alive to the possibility that different practices could change your status within that time. Yeah but there's an interesting twist so if you're foreign at exchange but you're not foreign at completion provided you pay the surcharge duty your liability that rose because you're foreign at exchange if you pay it you can actually get it back if you're not foreign at completion.

But the problem is number one if you weren't expecting a foreign surcharge liability and I mean it's a lot of money it's currently at 8% it's going up to 9% from the first exchange in January 2025 and that's on top of normal stanchy. But the thing about is if you weren't expecting to have to pay 9% on top of the normal stanchy well where are you going to get the money from? Now sometimes it's not an issue because a lot of these liabilities are very high sort of value property so the individuals are relatively well off but if they're not they're becoming the issue well how do you fund an unexpected liability of hundreds of thousands of dollars often or sometimes it's at the low millions and yes you will eventually get it back but we're refunded for certain size it's going to take a couple of weeks at least to get the money back from revenue NSW. Now let's look at the obverse of that.

You're not foreign at exchange but you're foreign at completion. Now this is where a lot of traps are the reasons you're filling your purchase or declaration off the back of the exchange and you're not a foreign person and then by the time completion comes around you've forgotten that you've become foreign again in the case for example if you're New Zealander with a 444 subclass of visa they're out of the country completion. So they're actually liable for the surcharge on the transaction because they were foreign at completion. So to say bite at two points so you've got to be non-firing at both points or at least if you were foreign at the first point you've got to be non-firing at completion so you can pay and get your money back.

Wow well I certainly think that any listeners who have New Zealand clients are certainly paying very very careful attention now and I think the general take home from this is that in any category of visa you need to be very very particular about what the details of the visa are and to satisfy the 200 day requirement. Yeah from what I understand I think if you pop onto the Department of Home Affairs website I'm pretty sure it's got a functional whatever that you can actually put in the visa type number and it will tell you what the conditions are attached to the visa but it also will probably pay you as well to have a look at the explanatory notes to the purchase of declarations so what revenue is saying about some of those visas because I say bridging visas from memories one that kept coming up as a problem. And it's not a note in the area of immigration law for different categories of visa to pop up and disappear and it's constantly changing area. It is a constantly changing area and there are literally dozens if not even low hundreds of visa types so you've got to be careful in each and every host.

And to recap the point that you made earlier it serves a client's best interest not to assume that the client themselves is fully across the detail of their visa status because that's why it's so these things are complex and sometimes you have an understanding that can be a little bit wrong and it sounds like the financial consequences of it in this instance can be quite profound. That's right and the other thing is a lot of their clients buying these high value properties English isn't their first language and they're reading an English language form. English is my first language and I'm struggling with some of that concept. Yeah from memory I can't remember if I've got translations of the form on the revenue south Wales website but even then if for example you're reading the term permanent resident as I say issues have come up with someone who's example a tax resident for federal tax purposes but that's not the test whether they're a foreign person or otherwise.

For your NSW search and search duties let's also talk about other types of foreign persons companies. So what we're seeing now particularly where people are lodging stuff through a duty so not only get to technically all the lawyers and I'm talking about so there's two ways you can lodge stamp documents in NSW there's a thing called EDR which is where lawyers can register and do it themselves in house or you can use what's called a client service provider that's for well-known ones around town or you have to do a duties so in other words you're lodging documents electronically but that goes to a live person at revenue NSW. Now where your transactions are going through a duties and it's a company that's a purchaser and someone has ticked no the companies nor the foreign person. The company themselves is now doing back checks in terms of their own ASIC searches as to who the shareholders are in the companies.

Now I'm not sure when it comes to individual shareholders when they're going to the next step for example when checking their citizenship so everyone should be aware revenue NSW has got information sharing protocols with Commonwealth and from them they are able to access details about people's citizenship but also their immigration records about when they've come into Australia and when they've left Australia and so that's how a lot of people have been caught. They've said on the form whatever they've been in the country 200 days either before exchange or completion revenues hopped onto the immigration records and found that it's not true. So we all know that when we come back into Australia we've got to fill out forms as to where we've been and how long we've been and why etc. So anyway revenues got access to all that.

But where revenue is for example finding through an ASIC company search a non-beneficial shareholding and they're sending out requisitions and they're saying well why is it not beneficial shareholders have been held by a trustee which most obviously it will be and they're saying all of it is is at the trustee of the discretionary trust and bingo. Nobody of course has had the presence of mind a lot of lawyers having to ask their clients or their clients don't know themselves who the shareholders are in the company or their firm to tell the lawyer it's a discretionary trust. Coming back to what I said before with discretionary trusts it's a pretty life threshold for them to actually be foreign. If actually there is one foreign person who is within the very wide class of objects of discretionary trust a foreign person.

So how does it happen? With modern discretionary trusts particularly with the natural persons the class of beneficiaries is often a very wide family group. So if for example you've got a principal beneficiary but for example their ancestors came from a steal overseas you know you've got an adora who's an attacker citizen and suddenly she's a beneficiary of the discretionary trust and so that makes the trustee a foreign person. And he takes one.

Or they're in New Zealand or resident in Australia's left the country briefly. Ha ha, don't go there Julian. But yes that's right. So anyway revenue in the requisitions they're saying all right well you can see there's a non-beneficial shareholding if it's a discretionary trust or a trusty.

So there's an interesting issue here about this change of law that happened in 2020 that says now by default all trustees have discretionary trusts a foreign person unless this is a river called prohibition. Yes let's just pause and dwell on that. So as a result of this amendment there's effectively a deeming or a presumption that everyone's foreign. Exactly.

And you've got to go through a very particular procedure to establish that you're not foreign. Exactly. So revenue did publicize at the time I think pretty widely through their website probably through seminars and that sort of thing. So they said all right well listen everyone there's a change of law coming and it's going to be retrospective unless you commend your trust needs or if you're drafting you when you incorporate into it it's a revicable prohibition on foreign persons being beneficiaries and from memory you had to do that before 31 December 2020.

So if you did it happy days and you did it properly the trustee was retrospectively treated as not being foreign back to the introduction of surcharge perciduity which was I think 21 June 2016. That in itself is a bit of a shot in thing it was a retrospective tax or for the surcharge land tax which came in on 31 December 2016. We haven't talked about surcharge land tax yet but we will. So I think there was an ad rush to get that you're moving on some people missed the deadline just a couple of things that even if people have made changes revenue has reviewed a lot of them and aren't satisfied with them so that's a trap in itself people tried to do the right thing but they didn't do what revenue wanted them to.

So what's the big message for all lawyers out there if you know for example that your purchaser is a discretionary trust or for example if it's a company and one of the shareholders is a discretionary trust you got to ask your clients to give you the discretionary trust and all dates of variation. And then you've got to check yourself whether or not it meets the prescriptive requirements of the law. One of the issues that's come up is well people say well I'm gee my client didn't make the deadline of 31 December 2020 so what I do now is it a loss cause? Well the answer is it's not a loss cause going forward it is for the past and that particularly manifests the surcharge land tax which you will talk about in a minute but what it means is yes before exchange the clients will be buying this property and discretionary trust.

Grab the trust aid or variations if at no stage either in the date of self and the variation they've tried to include the irrevocable prohibition on foreign beneficiaries then you have to actually amend the trust aid ideally before exchange I would say always before exchange. The thorny issue arises if you've missed it can you do it between exchange and completion. Let's engage with what we were talking about before that if you're foreign exchange but not foreign completion so just how you do it and then you're discretionary trust so you're not foreign then you've got to pay and get the money back. So back to company so that's one of the things you've got to do as well if a client company says we're going to be buying residential aid in a company there's a lawyer that's incumbent upon you to trace all the way to the top of the ownership train to determine that there are no foreign persons either foreign individuals or trust discretionary trust for example that have got at least one or more foreign persons as beneficiaries or for example if it's a unit trust you don't have a unit hold of it's a foreign person it's a life threshold there you're only a foreign person holding 20% of the units of the units and the interest and their foreign and those sort of things.

And again to remember that you need to do those tests you need to drill down all the way at least two points in time. Yeah absolutely but the idea is you save yourself the misery and you do it for exchange so you ask all those questions. You were talking about the need to amend the trust need to have this irrevocable prohibition. Yes.

It was a statutory deadline for the time when that has to occur so if you missed the statutory deadline is there any ability for that deadline to be extended somehow or for a de-variation to be made retrospective to sort of look like it complies with that statutory deadline? Yes so the statutory deadline the purpose of meeting the statutory deadline is to protect yourself from the retrospective application of the tax. Right. So technically what the law said is if you're the trusty discretionary trust and you haven't got the irrevocable prohibition in there before as I think it was 31 to 7 2020 then we will tax you back to 2016 if you bought any residential land 2060 3020 or if you held any residential land as trusted that discretionary trust which engages the surcharge land tax provisions.

But just because you missed the deadline okay the past is gone and you don't have the retrospective protection but you can always amend it now before it's changed and you won't be deemed to be a foreign person going forward. It's just you don't get the retrospective protection looking backwards. You mentioned that there was a degree of publicity about these changes but it also does seem to be a very technical area and the sort of area where even with the best of intentions you might come cropper. What's your making genuine mistake is that going to help it all in the process of trying to get these assessments challenged?

Yeah look unfortunately making reasonable the stake or ignorance of the law has never helped anyone certainly based on all the tribunal cases which is where all the litigation has been in this area I can't recall any Supreme Court cases and from memory I think every single tax power has lost their cases in the tribunal or in can. No it's the sort of best effort reasonable mistake manifested selfies for example the ability to remit penalty tax or interest. So with all these search charges retrospective search charges assessments which get picked up through order often years after something has happened. There's always in addition to the primary liability with a search charge per studio search charge land tax there's also penalty tax which starts at 25% but there's a discretion to remediate this reasonable care taken and then there's interest as well.

So it's a triple whammy but interest is also the case law says every reasonable care was taken so the question is if a client goes to a lawyer and they're acting on the conveyance is that enough to say well I was using a lawyer does that mean either client being the person who's actually primarily liable did I take reasonable care because I engaged the lawyer and I think the way the case is developing is no that's not enough that the lawyer themselves has to have taken reasonable care and that's always a tricky question for example did the lawyer ask all the questions we've been talking about in terms of visa types and doing company searches to see what's at the top of the chain of ownership and company or for example if they ask for the trustee in dates of variation to see they're not the irrevocable prohibition foreign beneficiaries was in there and even if they did did they have the presence of mind or see whether it was even effectively drafted. Yes and anyone looking for a bit of leniency or salvation certainly wouldn't be getting much comfort from the recent administrative tribunal decisions one reason one is kettis PTYLTD as the trustee for the Calarachi family discretionary trust but again all those things that you just identified set out in very clear black and white genuine mistake doesn't make any difference appeals to notions of fairness leniency or natural justice just not relevant when considering the validity of assessment under review. Yeah and I think if the tribe you know hasn't said that once they've probably said it over a hundred times all those things you've mentioned which everyone every dissatisfied taxpayer chucks into the mix they always get in in screaming hope. Yeah I think it was an earlier case where there was a suggestion that the commissioner should have made these changes more public and put the taxpayer on notice but no dice there are they?

No no the other things as well just sorry just talking about foreigners as well with clients sort of either having failing them or misleading their lawyers and saying if they were permanent reasons I was in the country for 200 days so revenues back checking that because they say they've got access to immigration records but lawyers with authorisation can actually also verify that their clients are telling them the truth. The authority of anyone can access again I think it's the Department of Affairs website I might be wrong about that but one of the common agencies you can actually go onto their website and with authorisation from the client you can actually access their immigration records to see what they really were in the country 200 days in the year before exchanging completion. Well Andrew you promised it so many times already that I feel like I should ask you we've been speaking so far about the SPD. Yeah.

The surcharge purchaser duty now look this is tax law I assume that everything that you've said just applies equally and consistently and validly for the surcharge land tax as well tell me it's so and yeah look it would be pretty much is Julian so the definitions and concepts for surcharge land tax that they're all borrowed from definitions that are in the duties act or a lot of them are borrowed from the foreign acquisitions of the daycovis act which no one really can understand but in any event look the difference is surcharge person duty that's when you buy something that's residential foreign person buys residential land surcharge land tax is where a foreign person holds residential land in New South Wales at one of the annual taxing dates for land tax which is always 31 December of every year. The concept of who's a foreign person is the same the 200 days required is the same as if it's a permanent resident and at least in this case you don't have to do it for two dates it will just be that year that yeah although yeah although there's really really there's a tricky provision which actually can sometimes help I think it's a permanent residence when they're actually using an occupying land as their principal place of residence I'm just going to pause here and say this is a massive trap again is it incumbent upon lawyers to tell their clients about this liability probably so permanent residents for example I think they are able to buy land in Australia to live in this their home again this furburals about that let's assume they are because this happens all the time with the liability so interestingly foreign persons if they do own residential land in New South Wales and they do use an occupied as their principal place of residence they get an exemption from normal land tax but they don't automatically can exemption from surcharge land tax that depends upon whether they satisfy the special conditions which only from the applied to permanent residence this is really the way it works so where the land tax works is you look at land you own at 31 December in a year and then that determines your liability otherwise for the year starting on the first of January immediately after that so remember the way this exemption works for permanent residents to get out of surcharge land tax on their principal place of residence in New South Wales is it's a prospective test from memory so in other words you have to satisfy the commissioner so you make a declaration in advance you say I am telling you now that I will be using an occupying my principal place of residence in New South Wales for a continuous period of 200 days I think from one January 2025 so absolve me from my surcharge liability that sort of notionally rises at 31 December 2024 so a lot of issues there have a reason about what is continuous mean and I think they did amend the law to say it really means what it says like it means physically in Australia apart from I think very minor physical absences and I recall whether or not it's even at the commissioner's discretion whether it's up to him whether he considers to be a minor absence to be a minor absence so say for example you had a sick relative overseas or at 198 days and you had to go and see a sick relative in the United States for a couple of days or weeks it's not clear whether or not that would be the type of circumstance the commissioner would let you off the hook and the thing about is it's a hard day to fail the 200 days continuous you're at 199 days and you don't get to the 200 the tribunal decisions on generally the 200 day test say it's binary like you either do or don't make it so I think everyone listening will be very very alert to the complexity and the needs for extreme caution and making sure instructions are clear verified and potentially also getting additional expert advice where necessary let's talk down about some practical tips then Andrew what tips would you suggest for solicitors we're looking at establishing trusts by deed or will okay so yeah well with deeds discretionary trust deeds you've got to make the client aware that unless they've got the irrevocable prohibition in the discretionary trust so we're talking about need of vigorous we'll talk about testimony trust in a minute you got to get their instructions or at least you got to tell them and say look if you're going to be buying land residential land in yourself I was in this discretionary trust if you tell me you don't want the irrevocable prohibition in there that I'm telling you that each and every year you're going to be up for in addition to any land tax surcharge land tax which I think from the reason it's going to five percent from one January 2025 so it's a big slug and there's no threshold either it's flat so that's up very quickly sometimes you've got clients that'll say look I take that on board but look I do actually want to be able to make distributions to people who are foreign persons as to why they would want to do it I've got no idea but sometimes they do at least they want the flexibility because for example factually there are going to be foreign persons caught within the orbit of discretionary objects whatever the discretionary trust within the white classes if that's the case you file note that you're told the client and you file note what the client told you probably met the client sign the file note as well so that it's abundantly clear that they have voluntarily offered themselves up to be paying surcharge land tax each and every year but if they say oh no no I don't I'll be paying the surcharge land tax then you need to draft the irrevocable prohibition to build it into the trustee so that no foreign person could be a beneficiary and the prudent thing to do is if you have enough time for a taxing date before 30 month December upload the trustee to the land tax portal of revenue new south Wales which was highly eventually got to register through service new south Wales and then ask revenue to sign off before the taxing date that they're happy that the terms of that trustee whether incorporated into it or incorporated by variation to satisfy them that foreign persons are irrevocably excluded you need that so that their system isn't going to pick up that the land is owned by discretionary trust because if they do that automatically by default if they haven't shown them the trustee and they haven't verified that it's okay you'll get a default assessment for surcharge land tax and then you'll have to object to that sort of thing the wording of the irrevocable prohibition is that a a set formula particular set of words not really you've obviously got to pick up definitions that are in the duty sack because they also apply for surcharge land tax so you obviously have to exclude any person who's a foreign person under the duty sack which includes deemed foreign persons there's actually two places you find the definitions one section 104 J of the duty sack the same also applies for land tax purposes as well but also 104 J which is the demon provision that says any trust even discretion trust is foreign unless there's the irrevocable prohibition on foreign beneficiaries so you got to exclude those types of foreign persons by definition some people go wider and also talk about any person who may in the future be deemed under you know legislation that hasn't even risen so people trying to anticipate what might happen all the commissioners administrative practices revenue rulings that sort of thing they try and cover the field as to how is it that someone could be foreign and if it's not just by legislation they try and anticipate if the commission might have a practice currently he doesn't but I think people are just being prudent but no there is no set words but there's certain things that you don't need to build into it and go back to what you said before whatever formulation you've chosen prudent to actually upload it to the commissioner and make sure that you've actually got the person who's going to be deciding to be giving you a ticket event that's right so for wills again there was an interesting transitional provision there so for wills typically where this arises is where one or more of the beneficiaries of discretionary testimony trusts which is a very common mistake planning technique there was a grain furthering a transitional provision I think it said if you will or coddasil to your will these coddasils of course even if they don't touch the sort of provisions we're talking about in terms of irrevocable provisions i think any change by coddasil can actually republish the thing that it is the will of the coddasil had to have been i think from memory executed before the 31st of december 2020 and if it was then if you've got a testamentary trust arising under that will from the coddasil from memory you didn't leave the irrevocable prohibition on foreign beneficiaries of the testamentary trust protected most typically from surcharge land tax because if for example residential land is passing into a testamentary trust under a will remember i think there's a duty exemption but when the land actually passes to the trustee there after unless there's a prohibition and it's grandfathered and you're going to be up for surcharge land tax a year after year and i guess one of the traps is as well sometimes wills don't allow you to actually mean the terms of the testamentary trust so that's another thing as well when you're taking instructions from a client because obviously now will pass 31st of december 2020 so if you're taking instructions from client either drafting a new will or a coddasil just be conscious that if there are beneficiaries who are testamentary trusts you'll need to get their instructions on whether or not they do want the irrevocable prohibition on foreign beneficiaries because if they don't going forward when the residential land passes under the will to those testamentary trust they'll be up for the surcharge land tax again it's a matter of instruction from the clients you need to make them aware of it and sometimes i say okay i'm happy to well no one's ever happy but i understand surcharge land tax yes will incur because i do want that testamentary trust to be able to benefit a foreign beneficiary whatever the outcome is you got to tell them that you told them about the surcharge land tax and you've got to know what their response and instructions were and the same would apply to advising on any purchasing or holding a residential property yeah absolutely my first reaction whenever i see somebody talking about buying some land my first question is is it residential land yep okay well who's the purchaser right well it's a person right well if you don't all the relevant checks not go and do it for exchange is it a company yep all right well if you've done all the asset searches and you're the same as the shareholders and if there's any shareholders that are holding on them officially are they trusted as discretionary trust have you seen the trustees have you seen variations have you seen whether the clauses are in there have you checked whether the clauses are even okay or if it's a discretionary trust you ask the same other questions unit trusts is the same thing but the unit register with unit holders etc etc etc great detail required what about if you do find yourself getting either assessments or requests for information from revenue new stuff well is any practical tips for lawyers in that scenario? yeah absolutely so number one i mean it'll tell you you've got to respond so do respond if you don't that you can make things even worse i should say that most investigations are carried out by revenue for good cause because they've backed checks things that don't match up with what they've been told so you do need to respond obviously you need to onboard your client immediately and you got to get to the bottom of whatever it is that's upsetting revenue and if there's something that needs to be disclosed you disclose it when responding if for example there has been a liability trigger to know and realize that the revenue will always saying they let us listen if we find your foreign there's going to be surcharge puts a junior land tax puttful so there's going to be interest in penalty tax there's often not a lot you can do about the primary liability but one of the things that you come to mind is you've got to make submissions back to revenue and additions providing information asking for a remission in whole part of the penalty tax of the interest will be granted in the early days they were more lenient not so much now but if you don't ask then you're not going to get but there are some things a checklist if you like you can go through to see where the revenue is on the right track so revenue might say look you're a permanent resident but you're winning the country 200 days well you can actually as i said before you can actually access someone's immigration records from this commonwealth department look 99 times out of 100 probably 999 times out of 1000 revenue will have got it completely right only seen one instance where i think someone had the identical name as someone who was a purchaser they got the wrong person and in fact this person really had by checking the right migration details which they were accessible to access they were in the country another one as well is verifying whether somebody who might have been foreign at exchange was actually non-foreignate completion which would mean you'd say all right what you got is we're foreign exchange okay we're gonna have to pay the liability but in fact here's the evidence approved there are non-foreignate completion so we pay the money and thanks we'll have the money back there's an interesting quote with discretionary trust deeds there's a special grandfather in provision no one's seems to know about it and it's always the first thing i tell people about if factually a discretionary trust deed had no foreign beneficiaries on the date the amending legislation and i'm reluctant to say the day because it slipped my mind loys can verify it themselves i think if you look at the transitional provisions in the schedules to the gd-sag and the land tax act i think it is i suppose the land tax management will maybe turn that as well so whatever this date is if you can prove to revenue satisfaction that there were factually no foreign beneficiaries then the trusty that discretionary trust is protected from being being to be a foreign person until such time that factually someone does come a beneficiary now this has actually helped a lot of people that have come to me upset with revenue is said oh okay well hang on we've detected that the land is held by the trusty that discretion trust and most typically this is manifested itself through a say so charge land tax investigation now with the cases where we've been able to satisfy revenue in relation to the application this transitional provision a lot of the trust deeds have been really really old and by that i mean they're from the late 60s or the 70s or the 80s when discretionary trusts were in a sophisticated zone and they often had a very very limited class of discretionary objects who are often just natural persons and they may not have actually been that much of them so one of the first ones i did for a client success where i think the only discretionary objects were actually five natural persons at this particular date and we were able to get all their passports which showed at that date they were all Australian citizens and so we were able to get them out of the search arms land tax liability not withstanding that the trust deed actually couldn't be amended because it was so old it didn't even have an amending clause so it's worked for a couple of clients with a more modern trust deeds they've often got such a wide classes of discretionary objects it's virtually impossible to prove that in fact like all the natural persons or Australian citizens or non foreign persons because it includes some very remote relatives and it's very hard to identify who those relatives might be and what their status is foreign persons are otherwise or reasonable these companies and trusts who are beneficiaries and again trying to prove discretionary trust is not a foreign person because there aren't factually any foreign beneficiaries it almost becomes impossible but anyway as i say some clients have been able to do it well Andrew there definitely seem to be a lot of traps seen by SPD and SLT thank you so much for running us through the one risk on there thanks for having me join thanks for listening to risk on air by valkava join us for the next episode on current risks 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