There is a noticeable increase in Revenue Office rejections of family trust attempts to exclude foreign persons. Many brand-new family trust deeds fail to remove foreigners: well, at least the satisfaction of the State Revenue Office.
Also, it is now a mistake to think a sign-off by the Revenue Office is permanent. A past sign-off does not mean that in years to come the Revenue Office will continue to see the foreign variation as valid.
If your client has excluded foreigners, get it checked by the lawyer who prepared the Deed of Exclusion — before Revenue does a later audit. From what we are seeing, about 40% of Family Trust variations to remove foreigners do not hold up during State Revenue audits.
When updating a Family Trust to exclude beneficiaries, this is what to look out for.
Three mistakes when excluding foreigners in Family Trusts
These are the common mistakes that we are now seeing on a daily basis:
1. Failure to remove the foreigners via a separate Deed of Variation
Do not exclude foreigners in the main trust deed. Even for brand-new trust deeds, the foreigner exclusion should be done in a separate Deed of Variation. Trying to weave exclusions straight into the main deed is a classic trap:
- A separate Deed of Variation is preferred by some State Revenue offices.
- The Revenue Office can clearly identify the exclusion.
- In later years, if the Revenue Office requires additional requirements, they are more likely to be achievable. And without triggering a resettlement.
- The mixing of the Family Trust Deed with the foreigner removal is more likely to trigger a resettlement.
Best practice: Use a separate Deed of Variation — always keep the foreigner exclusion in a separate Deed of Variation. Even if it is a brand new Family Trust deed.
2. “Dormant” or Trigger Clauses that operate later
Conditional clauses are put in the Family Trust deed now. But they only operate if your Family Trust later purchases the affected real estate.
The clause to remove foreigners sits dormant until you actually buy the affected real estate. Afterall why needlessly exclude beneficiaries if you do not have to?
That makes good sense. However, reports are coming in that Revenue Officers are calling these ‘conditional’ clauses or loopholes. They are being rejected. State Revenue offices want the exclusions to be fully operative at the time the Deed of Variation is signed. No waiting around. No, wait and see.
Further, by the time your Family Trust buys the affected real estate, the rules have changed. What was correct 3 years ago often will not work now.
Adding any kind of condition is wrong. Words such as “If/When/While” do not work. See N & G Grima Family Trust Pty Ltd v Chief Commissioner of State Revenue [2025] NSWCATAD 149 and, for example, section 5D of the Land Tax Management Act 1956 (NSW).
Best practice: At the time you acquire the affected real estate, only then build a Deed of Variation to exclude foreigners. And have the exclusion not be subject to any conditions.
3. Removing foreigners from more than one jurisdiction at the same time
We saw one brand-new Family Trust Deed that attempted to exclude foreigners for NSW, Victoria, and Queensland. Bizarrely, the one piece of land the family trust owned was only in Queensland.
Australia is a federation of states. Each state has its own special requirements for removing foreigners. Most Family Trusts that seek to exclude foreigners from different states in one document fail.
Best practice: Separate deeds of variation for each state.
- Cramming Multiple Properties into the Same Trust More properties = more chances for state rules to clash and create weak spots. One crack exposes the lot. Consequence: Surcharges hit harder and wider than you ever imagined. Fix: Keep properties in separate trusts where you can — much cleaner protection.
- Using Vague, Generic or Copied Exclusion Wording Off-the-shelf phrases or loose definitions get shredded. Revenue demands razor-sharp, state-specific language — anything less fails. Consequence: Instant “foreign” status — routine land suddenly costs a fortune extra. Fix: Exact, tailored wording pulled straight from the right legislation.
- Not Getting a Private Ruling First Diving in without official sign-off is gambling. Hidden flaws only show up in audits — when it’s way too late and way too expensive. Consequence: Back taxes, penalties, forced fixes that cost far more than doing it right the first time. Fix: Private ruling up front — locks in that you’re safe.
These mistakes are burning people every month — don’t let your trust be the next casualty.
Our $660 state-specific Deed of Variation stops the bleeding: ironclad exclusions, no surprises, built for today’s Revenue crackdown.