Section 33 Change of Trustee Transfer
1. In Victoria, land transfer (stamp) duty (Duty) is ordinarily paid on the transfer, acquisition or purchase of real property at the time of the transfer. Unless an exemption or concession applies to the transfer, Duty is calculated by the consideration paid by the transferee or the current market value of the property, whichever is higher.
2. Section 33 of the Duties Act 2000 Vic (Act) provides a full exemption to Duty in circumstances where land is transferred from a retiring trustee to a new trustee due solely to the resignation of the retiring trustee.
3. A trust is treated as a separate legal entity, and is administered by a trustee. A trustee may be remove or replaced for many reasons including, for example:
3.1. The current trustee may be an individual who no longer wishes to act as trustee.
3.2. The family may wish to appoint a corporate trustee to provide additional asset protection to the family group. Individual trustees are personally liable for debts of the trust and appointing a corporate trustee whose sole asset is its nominal share capital can significantly reduce overall liability.
3.3. If a couple have a self-managed superannuation fund (SMSF) and are the only personal trustees of their SMSF, on the death of the one of them, they will either need to add another trustee of the SMSF or they must appoint a corporate trustee of which they may be the sole director.
3.4. Family groups with multiple trusts sometimes use the same entity as trustee throughout their structure. Having a separate corporate trustee for each trust is the preferred position from an accounting and legal perspective.
3.5. Relationship breakdowns. If a former spouse is the trustee (or one of the trustees) of a trust the control of which is retain by the other spouse, the exiting spouse should be removed as trustee as part of the implementation of a property settlement.
4. Section 33 of the Act provides an exemption to Duty when a property is transferred due to a change of trustee.
5. When assessing the eligibility for section 33 of the Act, the State Revenue Office (SRO) must be satisfied that the transfer occurs, with no consideration, solely:
5.1. because of the retirement of a trustee or the appointment of a new trustee, or other change in trustees; and
5.2. in order to vest the property in the trustees for the time being entitled to hold it.
Evidentiary Requirements
6. For this exemption to be applied, a submission to the SRO is prepared applying the legislation to the facts of the matter and includes the following documentary evidence as part of the submission:
6.1. stamped trust deed (except for SMSF) with copies of variations;
6.2. deed of appointment of new trustee;
6.3. financial statements for the years:
6.3.1. when the property first became an asset of the trust; and
6.3.2. immediately prior to the transfer showing the property is still a trust asset;
6.4. statutory declarations by retiring trustee and new trustee; and
6.5. a copy of the minutes of the retiring company trustee director’s meetings showing the change of trustee.
7. Once the SRO completes its assessment of Duty, the transfer can be registered.
Revenue Ruling
8. The SRO’s view on the application of this exemption was considered in Revenue Ruling DA.030. When determining whether this exemption applies, the SRO will consider:
8.1. the circumstances in which the former trustee has retired or been removed and the new trustee was appointed;
8.2. the circumstances surrounding the transfer of the dutiable property itself; and
8.3. whether the transfer of the dutiable property is part of a scheme for conferring an interest in relation to the trust property on a new trustee or any other person, whether as a beneficiary or otherwise, to the detriment of the beneficial interest or potential beneficial interest of any person.
9. Accordingly, where the SRO is of the opinion that the change in trustee results in a consequent transfer of dutiable property, forms part of a transaction or a series of transactions that have a ‘separate commercial objective’, the exemption will not apply.
Trust Deed
10. As part of the due diligence, the trust deed needs to be reviewed to confirm that the party with the power to remove and replace the trustee (ordinarily referred to as an appointor or principal) has the appropriate power to change the trustee. If such power does not exist, it may be appropriate to vary the terms of the trust deed or otherwise rely on the power in section 41 of the Trustee Act 1958 (Vic).
Final Point
11. A change of trustee transfer can be an effective tool to assist with client’s asset protection, succession and day-to-day administration of trusts. There are risks when seeking and applying for Duty exemptions, but our experience and expertise provides our client’s with certainly and peace-of-mind throughout these transactions. If you require assistance or wish to obtain further information in relation to a change in trustee and its implications, please contact:
Alasdair Woodford
Principal
T: 03 5225 5217| M: 0436 456 144
E: awoodford@ha.legal
Joseph Flanagan
Senior Associate
T: 03 5226 8504
E: jflanagan@ha.legal
Ben Smith
Lawyer
T: 03 5225 5262
E: bsmith@ha.legal
