Understanding the Foreign Person Test for Trusts
The Foreign Acquisitions and Takeovers Act defines when a trust is considered a foreign person. A trust is foreign if a foreign person holds a substantial interest. For trusts, this typically means a foreign person is entitled to at least 20% of the income or property of the trust. Discretionary trusts present additional complexity because potential beneficiaries may trigger foreign status even if they have not received distributions.
The test examines both the trustee and the beneficiaries. An Australian trustee does not make the trust Australian if foreign beneficiaries hold substantial interests. Corporate trustees add another layer because the foreign person test applies to the company itself. If overseas shareholders control the trustee company, the trust will likely be classified as foreign.
Documents Required for Trust FIRB Applications
We need your trust deed and any amendments to assess the trust structure. For unit trusts, we require the unit holder register showing all current unit holders and their residency status. Corporate trustees require company documents including the share register, constitution, and details of directors.
We also need identification documents for all relevant parties. This includes passport copies for individual beneficiaries and company registration documents for corporate entities. Property details are essential, including the contract of sale or the listing if you have not yet made an offer.
The Application Process
Once we receive your documents, we analyse the trust structure and prepare a detailed submission to the Foreign Investment Review Board. Standard residential applications are typically processed within 30 days. More complex trust structures or higher value acquisitions may take longer.
The FIRB application cost includes a government fee based on the property value. Our fixed fee covers preparation of the application, liaison with the Foreign Investment Review Board, and advice on any conditions attached to the approval. We handle applications for residential land acquisition, commercial property foreign investment, and agricultural land purchases.
Conditions and Compliance
FIRB approvals for trusts often include conditions. Common conditions require the property to be sold if the trust structure changes or if foreign beneficiaries increase their interests. We explain all conditions clearly and advise on ongoing compliance obligations. Breaching FIRB conditions can result in significant penalties, so understanding your obligations from the start is critical.
Some trusts may need to restructure before purchasing property. If the trust deed allows amendments, we can advise on changes that may affect foreign person status. In some cases, establishing a new trust with appropriate provisions may be more practical than amending an existing structure.
