A recent case reminds us of the importance of the settled sum and proper trust records in ensuring the validity of a trust. The Victorian Civil and Administrative Tribunal (Tribunal) recently denied tax benefits that would otherwise be available to trusts by finding that the trusts did not in fact exist because the settled sum had not been paid and the documents had not been executed. The case is Aston (Aust) Property Pty Ltd v Commissioner of State Revenue (Taxation).Hadi Mazloum
The case of Aston reminds us that when you establish a trust, you need to comply with the formalities. Although the Establishment Kits, and associated documents, in Cleardocs document packages facilitate this, it is essential that the set processes are followed with care and precision.
The Tribunal had little empathy for the appellant's mistakes in setting up the respective trusts. Accordingly, failing to pay the settled sum or failing to show that the trust deed is complete and properly executed may:
You can read the full case here. We discuss it below.
As set out in the documents included in the relevant Cleardocs trust packages:
The decision in Aston is but one example of why it is so important to follow these steps – without exception.
In the case of Aston, Mr Nicholas Corcoris was a property investor. He purchased properties through trusts, the trustees of which were the appellant companies in this case. Mr Corcoris was a director and shareholder of most of these companies. He also prepared the trust deeds himself, without the help of professionals.
Mr Corcoris and other entities associated with him objected to assessments made by the Commissioner of State Revenue (Commissioner). They alleged the Commissioner wrongly assessed transfers of property on the basis that the Commissioner did not have regard to the fact that the properties were held in trust.
Mr Corcoris stated that all the trusts were created before the relevant property settlements in which the purchaser companies received the transfers of land in their capacity as trustees.
The Tribunal found in favour of the Commissioner. The Tribunal found that the 'trusts' Mr Corcoris created were 'nothing more than trust schedules, sometimes combined with trustee execution pages, which were designed to satisfy his bankers and the regulatory requirements of the Commonwealth authorities and the Commissioner of State Revenue'.
The Tribunal was sceptical about how Mr Corcoris created the trusts each time he purchased or transferred a property. Significantly, the Tribunal found that:
On the basis of the above, the Tribunal concluded that the trusts did not exist and the appellants were not entitled to any tax benefits that would have otherwise been available to the trustee companies in the purchase and transfer of the properties.
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Julian Smith is a partner in the Maddocks Commercial team.
Julian advises extensively in the following areas:
Julian advises clients ranging from public companies servicing the wholesale financial services market to high net worth individuals and their advisers.
Julian has been with Maddocks since undertaking articles in 2001.
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