Transfer of property from trustee to beneficiary and asset protection
Depending on your personal circumstances, having an asset protection strategy in place that involves a family trust, fixed trust or unit trust can be pivotal in protecting your investment properties and estate, as well as potentially access a transfer duty exemption or concession when transferring to beneficiaries. The Duties Act 2000, 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 and Section 36B of the Duties Act 2000 – transfer of property to a beneficiary of a unit trust have the following 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 trusts and unit trusts a complete stamp duty exemption can apply where:
the dutiable value of the property not more than the value of the beneficiary’s or unit-holder’s interest in the trust (the exemption applies on a proportionate basis), and;
the property distribution reduces the beneficiary’s or unit-holder’s interest in the trust.
Discretionary trusts (Family Trusts)
For discretionary trusts the stamp duty exemption applies equally to all subject beneficiaries and the distribution to a particular beneficiary does not extinguish or reduce the beneficiary’s interest in the trust. Therefore, duty exemptions will apply where 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.
This stamp duty exemption will not override the requirement of the trust deed permitting the trustee to exercise its discretion to distribute the property to the subject beneficiary and the trustee must remain in compliance with the particulars of the trust deed. Capital gains tax and family trust distributions tax obligations also need to be taken into consideration. Independent financial advice on the holistic tax implications of the title transfers by a registered tax agent is critical.