Stamp duty exemptions on transfer of property from trustee to beneficiary
The Duties Act 2000 provides certain stamp duty exemptions for transfer of property from trustee to beneficiary.
The stamp duty exemptions fall under three categories:
- Section 36 of the Duties Act 2000 – transfer of property to beneficiary of a fixed trust
- Section 36A of the Duties Act 2000 – transfer of property to a beneficiary of a discretionary trust
- Section 36B of the Duties Act 2000 – transfer of property to a beneficiary of a unit trust
Section 36, 36A and 36B general requirements
- Duty (if any) must have been paid when the property first become subject to the trust.
- The transferee must have been a beneficiary of the trust when the property was acquired and became an asset of the trust (i.e. the relevant time).
- There must be no consideration for the transfer and the transfer of property from trustee to beneficiary must not be part of a sale or other arrangement.
- The exemption is available for property that has been subdivided or consolidation. Property derived from a subdivision or consolidation of titles forms part of the same dutiable property which first become subject to the trust.
Fixed and unit trusts
For fixed and unit trusts under section 36 and section 36B a complete stamp duty exemption can apply where the dutiable value of the property, as a proportion of the net assets of the trust fund, does not exceed the value of the beneficiary’s or unitholder’s interest in the trust (the exemption applies on a proportionate basis). The asset distribution must also reduce the beneficiary’s or unitholder’s interest in the trust.
For discretionary trusts under section 36A, the stamp duty exemption applies equally to all subject beneficiaries. A distribution to a particular beneficiary does not extinguish or reduce the beneficiary’s interest in the trust. For the exemption to apply, the subject beneficiary must have been a beneficiary at the relevant time or must have become a beneficiary after the relevant time by reason of:
- Becoming a spouse or domestic partner of a beneficiary; or
- Becoming an adopted child or step child, or being a lineal descendant of, a beneficiary; or
- Becoming an adopted child or step child, or being a lineal descendant of a spouse or domestic partner of a beneficiary.
It is important to note that this stamp duty exemption does not override the requirement of the trust deed permitting the trustee to exercise its discretion to distribute the property to the subject beneficiary. The particulars of the trust deed must be complied with for any distribution to be effective and without the trustee being in breach of its obligations towards the trust.
Trustees should also be wary of potential capital gains tax and family trust distributions tax obligations. Independent tax advice should be obtained from a tax accountant prior to making the decision to proceed with the transfer. This will ensure that the distribution does not lead to a tax burden which outweighs the potential stamp duty exemption.
Contact our experienced property lawyers to discuss your property transfer in detail.