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  • Writer's pictureClaire Tan

Transferring property from trust to beneficiary - Do I need to pay stamp duty?

Short answer - depends.


There are certain stamp duty exemptions found in the Duties Act 2000 (Vic) that we may look at to waive the expensive stamp duty for the transfer for different trust structures:

  1. From a fixed trust (Section 36)

  2. From a discretionary trust (Section 36A)

  3. From a unit trust (Section 36B)


PRE-REQUISITES

You and your circumstances must tick the following boxes:

  • Stamp duty was paid when the trust first became the owner of the property.

  • The beneficiary that you wish to transfer the property to (we call him/her 'the transferee') must have been a beneficiary when the trust first became the owner of the property.

  • The transferee isn't going to pay any money (or anything) to 'receive' the property, i.e. the transferee isn't buying the property from the trust and the trust isn't selling the property to the transferee.


FIXED AND UNIT TRUSTS

A full stamp duty exemption applies 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 transferee's interest in the trust. The asset distribution must also reduce the transferee's interest in the trust.


DISCRETIONARY TRUSTS

The stamp duty exemption applies equally to all beneficiaries of the trust. A distribution to a particular beneficiary does not reduce the beneficiary's interest in the trust.


For the exemption to apply, the transferee must have been a beneficiary at the relevant 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 lineal descendant of a spouse or domestic partner of a beneficiary.


The 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 transferee 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 as a trustee.



TAXES

You should always seek advice from a qualified tax accountant as there may be capital gains tax and family trust distribution tax obligations attached to the transfer.

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