Changing Trustee from Individual to Corporate Trustee

Discussion in 'Legal Issues' started by TomNewbie, 27th Nov, 2021.

Join Australia's most dynamic and respected property investment community
Tags:
  1. TomNewbie

    TomNewbie Well-Known Member

    Joined:
    3rd May, 2021
    Posts:
    45
    Location:
    Sydney
    I'm considering purchasing an IP in a trust.

    It doesn't seem cost effective to set-up a bucket company as the trustee as the distributions will be moderate and a couple of trustee's already are at the lowest tax bracket.

    So we would likely use an individual as the trustee/s to start with.

    How difficult and costly is it to change the trustee's from an individual trustee to a coporate trustee down laster on?

    I forsee in a few years time a couple of IPs with reasonable income but this would likely be years away.
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,258
    Location:
    Australia
    Worrying that you seem to be confusing trustees with beneficiaries.

    why do you want to buy in a trust?
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    The bucket company should never to the trustee.

    Get legal advice on this first

    Pretty difficult in practice and the legal cost would outweigh any perceived savings on not using a company from the start. If the trustee holds property in NSW it could also trigger stamp duty.
     
    Gen-Y likes this.
  4. TomNewbie

    TomNewbie Well-Known Member

    Joined:
    3rd May, 2021
    Posts:
    45
    Location:
    Sydney
    So the rental income can be distributed to retired family members with no other income.

    OK, thanks. Likely the property will be in QLD.

    OK, thanks
     
  5. TomNewbie

    TomNewbie Well-Known Member

    Joined:
    3rd May, 2021
    Posts:
    45
    Location:
    Sydney
    Yes, I might be. Perhaps I want a bucket company to be a benficiary as a trust (not trustee).

    So in order to have a bucket company as a beneficary later down the track (and not at the time the trust is set-up), I guess the trust deed just needs to be written in such a way such that a newly formed companies is able to be a benficary.

    In any case, I'll be seeking legal advice first. I just find I need to try to understand the jist of what I'm trying to do before engaging with a lawyer. Otherwise I don't really understand what they are telling me and I get confused with all the options.
     
  6. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,258
    Location:
    Australia
    Problem is if you are mixing up trustees and beneficiaries, what other questions are you not asking?

    you mention retired beneficiaries. Will the trust pay distributions to them in cash? Does it have the cash? If not, what are the estate planning implications?

    Have you considered the estate planning implications of having multiple ips (if these are the majority of your assets) in a trust? If you have multiple children, say?

    maybe you shouldnt start with assuming a trust is the best solution.
     
    Cadbury99 likes this.
  7. Bowser

    Bowser Well-Known Member

    Joined:
    9th Oct, 2021
    Posts:
    89
    Location:
    NSW
    I just went through this last week. It cost $900 for a good trust/family planning solicitor to do the trustee change from myself to a corporate trustee and review and update my trust deed. The documents and wording used is something I certainly wouldn't have considered.
    The corporate trustee is a different company to the bucket company I plan to use for income distribution
     
  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    I think it you are going to set up a discretionary trust with the intention of changing the trustee in the not too distance future, you might as well save some money, time and stress and just choose the right trustee from the beginning.
     
    qak and Paul@PAS like this.
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    A beneficiary company can be implemented at any future date provided it is completed prior to 30 June of that year
     
  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Changes to the trust will also mean changes to the ABN (if there is one), bank account and all investment titles. No duty, NO CGT...usually.
     
  11. Jem1989

    Jem1989 Active Member

    Joined:
    5th Jun, 2021
    Posts:
    43
    Location:
    Sydney
    I am considering purchasing via an SMSF. I have it set up the trust as individual trustee but have requested to change to corporate trustee due to lender requiring corporate trustees.The company has been created but the change to corporate trustee is still being reviewed by ATO. I think it takes 28days.

    Can the contract of sale be signed already if the bare trust and the corporate trustee of the bare trust purchasing the property have all been set up and and will not change?
     
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    The ATO dont review anything. I do hope that the ATO have already issued the notices for a Regulated SMSF election and ABN. The ABR can the be updated in minutes and is seperate to that of the ATO despite being its own agency. Of course without digital access you cant do that and may need your fund tax adviser to assist. The trust deed wont be valid with the incorrect details. I would suggest it should be replaced. Plenty of time.

    A response concerning signing a contract is legal advice. Typically a bare trust can only be setup AFTER a contract is made and loan matters etc all determined and ready to settle. My view is the custodian should be formed but the bare trust completion (which takes no time) can be completed once loan approval is known.
     
    Jem1989 likes this.
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    Complied with the trustee act?
     
  14. Jem1989

    Jem1989 Active Member

    Joined:
    5th Jun, 2021
    Posts:
    43
    Location:
    Sydney
    Hi guys can I ask for recommendation on who to get advice from in regards to SMSF purchasing? I tried calling a few law firms but they mention this is an area that is specialised.
     
  15. Jem1989

    Jem1989 Active Member

    Joined:
    5th Jun, 2021
    Posts:
    43
    Location:
    Sydney
    I have the ABN for the Superfund already when I initially set it up. Is there going to be a new ABN because I requested for the trustee to be changed?
    I haven't received documentation for the member/trustee change of the SMSF yet. And hence why I am unsure whether I can sign the COS or not.

    Does the trust deed of the Bare Trust need to change as well? In the front page it shows the SMSF with me and my wife as trustee, and the SMSF as Subscriber. But I have applied to remove us as trustee and replace with a company which has already been created.

    Where do I get legal advice? My conveyancer is not sure and I find it hard to speak to someone who deals with this. My accountant and broker thinks it is okay. But I want to be 100% certain it doesn't cause a problem down the road.
     
  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    You need a specialist lawyer, conveyancers are way out of depth.

    If you haven't got the paper for the change of trustee then the trustee has not been changed. The custodian trustee must show it is holding the asset of trust for the SMSF trustee so this should reflect the new trustee.

    New ABN is not needed, but the ABN will need to be updated with the new trustee.

    Don't sign the contract until the trustee is changed, without legal advice anyway, as this could trigger double duty and a host of other issues.
     
  17. Jem1989

    Jem1989 Active Member

    Joined:
    5th Jun, 2021
    Posts:
    43
    Location:
    Sydney
    Thank you very much!

    So I need to get the trust deed of the custodian trust amended.
    As well as the deed of the SMSF trust.
     
  18. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,672
    Location:
    Australia wide
    The custodian deed has to be changed before it is signed. The deed of the SMSF doesn't need to be changed, but a separate deed appointing the new trustee will need to be done and this should be done before it enters a contract ideally. other things are needed too
     
    Jem1989 likes this.
  19. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Sounds like a DIY attempt. Pretty typical and quite costly to fix.
     
    Jem1989 likes this.
  20. Jem1989

    Jem1989 Active Member

    Joined:
    5th Jun, 2021
    Posts:
    43
    Location:
    Sydney
    Yeah I have gone with ESUPERFUND to set up the SMSF which in hindsight I shouldn't have done. I should have also gone corporate trust in the first instance.

    The Bare Trust I asked my accountant to set up. I should have just asked the accountant to set it all up and it would have been easier.

    Regrets. $$$