Help on trust or no trust

Discussion in 'Accounting & Tax' started by Stiles, 28th Sep, 2016.

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  1. Hedgy

    Hedgy Well-Known Member

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    No i'm not talking about a bare trust. I'm talking about a discretionary trust. Don't have my paperwork here with me at the moment but if memory serves me correctly i'm pretty sure it is considered a S.56A transfer under the NSW Duties Act. My situation is this: I have a pretty standard discretionary trust with corp trustee. The trust holds an IP. For various reasons I intend to transfer the IP out of the trust in the near future to a beneficiary. My lawyer has received written advice from the NSW OSR that they will consider this a S.56A transfer and as such the trust will not be hit with the usual stamp duty and instead it will only be hit with a transfer fee of around $150. Like I said I'm pretty sure it is considered an S.56A transfer, but don't have my paperwork with me at the moment. Will confirm this detail in a few days when I've got my paperwork at hand.
     
  2. Paul@PAS

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

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    Advolorem duty is the cheapest concession and that is $500.This is generally only given for a transfer from one fund to another where the same members are involved. Discretionary trust or unit trust ?? State by state summary courtesy of SMSF Coach Liam Shorte
    Stamp Duty on Transfers of Property to an SMSF as at 01 Jan 2015

    s60-s62A of the Duties Act deals with these issues. s56A deals with some trusts and some issues with a beneficiary, not super.
     
  3. Hedgy

    Hedgy Well-Known Member

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    Just called my lawyer...my reference to S.56A above is incorrect. I was close though. Transfer of a property from a trust to beneficiary is subject concession duty of $50 under S.57.
     
  4. Hedgy

    Hedgy Well-Known Member

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  5. Terry_w

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

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    Thanks Hedgy. I wouldnt have thought s57 would apply to situations like this as the beneficiary of a dt is one of many. Hope you have a private ruling from the osr. Sounds lime a good lawyer.

    Will there be a loan on the property and have you sought tax advice on the deductibility of interest?
     
  6. Paul@PAS

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

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    Deed of Apparent Purchaser I assume ?? Looks and smells like it. This is an example of a declaration of trust which the Commissioner will accept at the time of the declaration. You cant just waltz up with a old declaration and ask for the concession. (The old Claytons !!). The Commissioner wont "be satisfied". They stamp it to confirm its acceptance and if asked a private ruling is given. Then later the property can vest to the beneficial owners.

    A variety of uses but generally asset protection based. One issue is that the parties on the deed (ie kids) have no interest for CGT purposes so despite name/s on title the actual tax concerns rest with others hence the description of a apparent purchaser. I have seen the main residence exemption given on this one BUT its hard and the ATO take some convincing. Other forms of trust can also use this...Even a nominee. OSR just seek proof that the apparent purchaser (kids) used proceeds that came from another party (parent). And that there is the dec of trust. Are these minors ?

    Not greatly different to the custodian issues arising with a SMSF LRBF. Title in one name but beneficiary is another.

    One for the lawyers to explain examples of use and its limits.,

    Interested in Rob G's inputs on this one
     
  7. Barny

    Barny Well-Known Member

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    Land tax 1.6%, really? Per year? So if the land value was 1,000,000 is that 16k per year, or thresholds still apply then calculated on that.
     
  8. Terry_w

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

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    Yes $16k per year. No threshold in nsw
     
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  9. Hedgy

    Hedgy Well-Known Member

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    Yes, I have a letter from OSR confirming that the specifics of my transfer complies with S.57 and that normal stamp duty won't apply. It is actually a pretty straightforward process and in my cases didn't require smart lawyering. OSR asked for several certified copies of documents relating to the trust and the property and then issue their written confirm as to whether they will apply S.57. I have definitely sought tax advice and it works for my particular circumstances.

    As for beneficiaries, my dealing with my lawyer and OSR on this clearly indicates that S.57 is not contingent on the number of beneficiaries--in a very brief high level summary, my lawyer provided the OSR with a copy of a trustee letter indicating that all of the interest in the IP was being transferred to a particular beneficiary and that was good enough for OSR.
     
    Last edited: 14th Oct, 2016
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  10. Barny

    Barny Well-Known Member

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    Wow. Any idea what the percentage is in Victoria?
     
  11. Terry_w

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

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    Not off the top of my head but it is much less than nsw.
     
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  12. Paul@PAS

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

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    Do you care to share the lawyers name ? I am always keen to find those who know this stuff. They are thin on ground. Dont post name here - They prob wont want that. My email is under this post
     
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  13. Terry_w

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

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    What documents did the OSR want? Did the beneficiary provide the deposit for the purchase?
     
  14. Hedgy

    Hedgy Well-Known Member

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    No probs Paul. Will send you details over the weekend
     
  15. Hedgy

    Hedgy Well-Known Member

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    Trust deed, loan docs, letter from trustee confirming desire to transfer the property to beneficiary and a doc from land titles office (can't recall what the land titles doc was). No, beneficiary did not provide deposit nor did OSR request any details as to who made the deposit.
     
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  16. VB King

    VB King Well-Known Member

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    Does the transfer to a beneficiary trigger CGT?
     
  17. Terry_w

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

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    Probably unless a bare trust or testamentary trust
     
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  18. VB King

    VB King Well-Known Member

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    Thanks Terry.

    It’s a discretionary trust. Everyone’s situation will be different, so taking NSW stamp duty out of the equation, one would still need to balance potential ongoing NSW land tax savings vs one off Capital Gains Tax.
     
  19. Terry_w

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

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    Yes it can still be worthwhile doing even if CGT come into play because
    a) its a form of debt recycling potentially, and
    b) can be cheaper going forward

    But new loans need to be qualified for too, so that might make it difficult. But a way around that may be to vest the trust but keep the assets legally owned by the trustee of the discretionary trust, but now as bare trustee for the individual. going forward the property will be taxed in the hands of the individual.
    But land tax will still apply until title is transferred - from a recent private ruling with Revenue NSW
     
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