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Trusts are a useful vehicle to structure your business and property affairs. However, care needs to be taken when entering into contracts using your trust to avoid the potential for paying double duty.
Stamp duty on declarations of trust
In NSW, duty is payable at rates of up to 5.5% on declarations of trust over dutiable property (such as land). Duty is also payable on transfers of dutiable property. If you buy property as trustee, you need to be careful that you don’t end up paying duty on the purchase of the property as well as the declaration of trust.
It’s all in the words
Revenue NSW has published a Revenue Ruling on declarations and acknowledgments of trust. The Ruling gives some useful examples of when statements referring to a trustee will be considered a declaration of trust and attract ad valorem duty. It also provides guidance on the correct wording to adopt to make sure that a declaration of trust is avoided in contract documents.
Risky Transactions
In our experience, the greatest risk for trustees arises with contracts for the sale of land and in any transaction where trust deeds are being amended or restated.
Trustees of superannuation funds borrowing money through limited recourse borrowing arrangements also need to ensure that their trust and custodian deeds are drafted carefully and meet the requirements of this revenue ruling.
Got questions?
If you are thinking about entering into a transaction as a trustee, we can provide advice on the best way to do this to ensure you avoid this potential double duty trap.
Contact: Victoria Absolon
Contact us at pdclaw.au or visit the Revenue NSW website for more information!
Victoria advises on a wide range of property and commercial matters, including contract negotiations and real estate transactions. She has a passion for assisting clients in understanding complex legal issues so that they can successfully achieve their business goals.
