How to Change a Corporate Trustee without Paying Stamp Duty

Hi,

I've got 4 residential units in Melbourne currently held in a discretionary trust with a corporate trustee. There is currently a construction loan on the 4 properties however construction is completed, certs of occupancy issued, separate titles formed and we'd like to move all 4 to a residential loan product.

I'm required to change the corporate trustee to another company with only some of the directors from the original company for bank serviceability and long term asset retention reasons (but I'm not changing the principal or appointer on the discretionary trust).

I've been advised that there is a new land tax commissioner and that if I refinance at the same time as changing the corporate trustee, there is a risk this new commissioner may interpret this as an event that incurs stamp duty. We've been advised to do this in 2 stages to be safe; stage 1 change the corporate trustee and then stage 2 refinance the loan.

Now my current lender refuses to make titles available to change out the corporate trustee because in their view, they need to issue a new loan to this new trustee to hold them accountable for the debt. The problem is that raising this new loan (and submitting relevant land transfer paperwork) will create this potential taxable event that we have been advised to avoid and puts us at risk of incurring stamp duty.

To be honest I'm feeling totally at a loss on where to go from here because it feels like a catch 22. Could someone please help me understand if this risk of stamp duty is legitimate or whether there is another way to approach this.

Thanks

Ruan

 

Did a lawyer advise you that? If so what is the basis for the advice?

You should probably apply for a private ruling if worried.

 

Hi @Terry_w yes I got advice from 2 separate lawyers and they both cautioned proceeding. So the private ruling process is the first stage of the transfer and, from what I understand, if the ruling is not in your favour, well then you've lost and have to pay the duty. There is no backing out of that position. So you're basically asked to commit to a path upfront, hope for the best and have to wear the cost of whichever way the ruling falls. Though I'm happy to be corrected on this because I'm not a lawyer and this is all very involved and confusing to me!

 

are you doing some sort of trust splitting here as well? - moving different assets to different trusts?

 

Changes to beneficial rights to income or trust entitlements of capital (and future income) can be dutiable. Assuming the trust have $2m+ of property in Vic.
Changes in beneficial ownership of property without changing legal ownership | State Revenue Office

 

Changing trustee would not change the beneficial ownership in itself.

Who is requiring the trustee to be changed?

 

No moving of assets.

 

assets will need to move if you are changing trustees. Title will be transferred from the old trustee to the new. But this should be exempt under s33(3) unless perhaps it is a scheme to change the beneficiaries of the trust.

But who told you to change trustees?