Until the new law, there had been debate about whether a distribution to a beneficiary was exempt from duty if the beneficiary took a transfer of trust property subject to a mortgage. If such transfers are treated as a dutiable transfer of land, the duty can vary from 1.4% to 5.5% of the land's value.
The new provisions clarify the situations in which transfers to beneficiaries will now be exempt from duty. Although the beneficiary will now need to satisfy the Commissioner that the transfer is not part of a 'sale or other arrangement' for consideration, merely taking a transfer subject to a mortgage will not attract the duty as 'a transfer for consideration'.
The old law is in section 36 of the Duties Act 2000. The new law is in sections 36, 36A and 36B.
Since 2001, section 36 has provided an exemption from duty on a transfer of dutiable property from a trust to a beneficiary if:
One aspect of this old section had been the subject of some debate. The Victorian State Revenue Office:
The SRO's position was that this situation more correctly reflected a sale and purchase for consideration - for which no exemption from duty was available.
Thankfully, section 36 has been amended (and supplemented by new sections 36A and 36B) to end that debate and to provide some additional certainty.
To benefit from the exemption under the new law, the beneficiary will need to satisfy the Commissioner that the transfer is not part of a 'sale or other arrangement' for consideration. The relating good news is that merely taking a transfer subject to a mortgage will not constitute a transfer for consideration.
The new law is summarised below in relation to each of a fixed trust, a discretionary trust, and a unit trust.
The transfer of dutiable property from a fixed trust (that is, if beneficiaries have a fixed entitlement under the trust) to a beneficiary will be exempt from duty  if:
A transfer of dutiable property from a discretionary trust to a beneficiary will be exempt from duty  if:
A transfer of dutiable property from a unit trust to a unit holder is exempt from duty  if:
Sale or arrangement for consideration
For the exemption to apply, the distributions to beneficiaries must be genuine distributions to beneficiaries in their capacity as beneficiaries - the distributions must not constitute a sale and purchase between the trustee and the beneficiary.
f the property transferred is subject to a mortgage and the beneficiary provides a new mortgage or assumes the liabilities under the existing mortgage, then the new section 36C makes it clear that the granting of the mortgage or the assumption of the liabilities is not to be treated as a sale or arrangement - unless the Commissioner is of the view that there is an arrangement designed to take advantage of the concessions.
Exemptions or concessions for transfers from a trust to beneficiary are also available in other jurisdictions - see table below. However, the criteria for eligibility differ from State to State.
|Jurisdiction||Amount of duty payable||Authority|
|Queensland||Nil||Section 123 Duties Act 2001 (Qld)|
|New South Wales||$10||Section 57 Duties Act 1997 (NSW)|
|Australian Capital Territory||$20||Section 58 Duties Act 1999 (ACT)|
|Tasmania||$20||Section 41 Duties Act 2001 (Tas)|
|Western Australia||$20||Section 73AA Stamp Act 1921 (WA)|
|Northern Territory||Nil||Item 9A Stamp Duty Act 1978 (NT)|
For more information, contact Maddocks on (03) 9288 0555 and ask for Anna Tang.
Andrew is a Partner in the Maddocks Tax & Revenue team.
Andrew provides advice on:
His advice covers both direct and indirect tax considerations.
Prior to joining Maddocks, Andrew was a tax consultant at a Big 4 Chartered Accounting Firm.
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