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.

Why?

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.

 

For expert property advice please contact Natalie Chani or a member of our Property Law team.

Related Articles

View All
Leasing & Lease Disputes / Property & Development / Real Estate Agents

COVID-19 Lease Update – The Regulations are in. It’s time to negotiate in good faith

The Covid-19 Omnibus (Emergence Measures) (Commercial Leases and Licences) Regulations 2020 (“the...
Read More
Leasing & Lease Disputes / Real Estate Agents / Property & Development

COVID-19 and Leases – The Legislation has arrived. What now?

On 24 April 2020 the COVID-19 Omnibus (Emergency Measures) Act 2020 (“the Act”) passed Victorian Parliament What is...
Read More
Leasing & Lease Disputes / Property & Development / Real Estate Agents

COVID-19 | Landlords and Tenants what do you do?

The Prime Minister has just announced a COVID-19 Mandatory Code for Commercial Tenancies But what is it and how is it...
Read More
Property & Development / Developments

GST easy as 1-2-3

Here are the top three questions we get asked by clients when it comes to GST and property   1 Is GST payable when...
Read More
Property & Development / Real Estate Agents / Leasing & Lease Disputes

The Retail Leases Amendment Bill 2019: What do the proposed changes mean for landlords and tenants of retail premises?

The Retail Leases Act 2003 (the “Act”) as presently drafted is intended to provide certainty and fairness in retail...
Read More
Property & Development / Developments / Real Estate Agents

First Home Owners Guide: What You Need to Know

First Home Owners: there are many things for you to think about – what suburb you want to live in, what type of...
Read More
Property & Development / Real Estate Agents

URGENT LEGAL UPDATE – New Statements of Information just released

Tisher Liner FC Law were consulted by Consumer Affairs Victoria in respect to their review of Statements of...
Read More
Owners Corporation / Owners Corporations & Strata / Property & Development

Looking behind an Owners Corporation’s ‘special resolution’ to authorise legal proceedings

At an interlocutory hearing, the developer asked VCAT to dismiss the Owners Corporations’ proceedings on the basis...
Read More
Property & Development / Developments

Sale of Land Amendment Act: What You Need To Know

The Act implements key outcomes of the Consumer Property Law Review’s examination of the Sale of Land Act 1962 (Vic)...
Read More
Property & Development / Developments

The Sun Sets on Developer Rights

The new Sunset Provisions will give greater power to purchasers in off-the-plans contracts The amendments will...
Read More
Commercial Law / Property & Development / Developments

TLFC Law Triple Finalists in the Lawyers Weekly Australian Law Awards 2019

Celebrating its 19th year, the Australian Law Awards, in partnership with UNSW Law, is the pinnacle of award programs...
Read More
Construction / Property & Development / Construction

What Developers should look for in a Vendor Statement

The Vendor Statement in particular is often the starting point for a developer’s due diligence enquiries and it is...
Read More