Transferors Beware! Stamp Duty Exemptions
By Jonathan Tisher
6 September 2016
Increasingly, we are seeing families transfer properties that are being held on trust, to their loved ones. This action is based on the assumption that because they are beneficiaries under the trust, the transfer will be exempt from payment of stamp duty. Transferors beware!
If there is not enough evidence to show that:
(a) the beneficial ownership of the property has not changed; and
(b) the property is actually being held by the trustee on behalf of a trust,
properties being transferred out of a trust can still attract stamp duty. Furthermore, it is fundamental that State Revenue Office (SRO) requirements can be satisfied.
It is not uncommon for a parent to buy property and hold it in trust for their children. Subsequently, at a later time when the children, as beneficiaries of the trust, are ready for the property to be transferred to them, the burden of paying stamp duty can arise, in respect to such a transfer.
A common theme is that parties purchasing the properties are not properly documenting the fact that the property is actually being held on trust. Thus, the SRO may deem beneficial ownership as having changed when the property is transferred from the trust to the beneficiary, thereby attracting stamp duty based on the then value of the property.
The SRO identifies standard evidentiary requirements set out to determine whether a transfer of property from a trust to beneficiaries will be exempt from stamp duty.
The ways of proving that property is being held on behalf of a trust include; company (as trustee of a trust) resolutions resolving to hold the property in their capacity as trustee, paperwork to show that mortgage repayments are deriving from the trust, etc. Therefore, it is important to keep all records of what properties the trusts hold and to maintain the appropriate documentation, both at the time the property is purchased and thereafter. We can assist and draft documents to assist with this record keeping.
If a paper trail cannot be shown and if it cannot be proven that the property is being held in trust, irrespective of the intentions of mum and dad (to hold property for the benefit of their children), the SRO may deny a stamp duty exemption and charge duty on the transfer.
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