Multiple Trust in QLD to avoid land tax

Hi,

I have read @See Change 's great post on somersoft.
My family trust currently have 1 IP in QLD, now looking to buy 2nd IP in QLD. To avoid land tax, I plan to set up a new family trust for the purchase.

I live in Sydney, to stamp a family trust deed here cost $500, but it's free in QLD. Just wondering if it is possible/legal for NSW resident to set up a family trust and stamp in QLD? (Not sure if it is required to stamp in QLD)

And can I use the same trustee company for multiple family trust? It will save set up cost. But would like to know the PROS and CONS. Will that cause problem for land tax and CGT etc?

Thanks a lot.

Tim

 

Hi Tim
Very common to do so in QLD.

If you use the same trustee and the beneficiaries are the same then it can be aggregated and you pay land tax as if in the one. it can also be an accounting and legal nightmare if something goes bad in one trust.

No stamping in QLD at all, only have to provide a certified copy of the deed if you declare the trust when purchasing property.

Setup loads of QLD trusts for my NSW clients, not an issue if buying property here.

 

Stamp duty is only payable in NSW if any party to the deed is in NSW when it executed in NSW. see s58 Duties Act (NSW)
http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s58.html

 

Possibly could cause problems depending on the terms of the trust because the trusts can be aggregated.

 

Multiple trusts with separate classes of beneficiaries?
Also perhaps multiple trustees?

 

Yes there are many ways around it. I can't get the land tax act QLD up at the moment, but from memory there is a trap for trust with same trustees and beneficiaries and beneficiaries is defined to include those in whose benefit power has been exercised.

 

There may be a cheaper way to do it, but based receipt of land tax over the last couple of years, our method isolates properties in the eyes of the OSR QLD, that being:

Property 1 held in A Pty Ltd ATF A Trust
Property 2 held in B Pty Ltd ATF B Trust
Property 3 held in C Pty Ltd ATF C Trust

Obviously this does not constitute legal advice, and I'm sure there are other things to consider but purely from Land Tax perspective we know this works for us.

 

Simple and no aggregation issues.

 

Thanks a lot everyone.
Does it matters if the company A, B and C have same directors and/or the Trust A, B and C have same beneficiaries?

 

No. Because of s20. http://www.austlii.edu.au/au/legis/qld/consol_act/lta201090/s20.html

Also read the definition of beneficiary at s24 http://www.austlii.edu.au/au/legis/qld/consol_act/lta201090/s24.html

 

The stamp duty on the deed issue has been raised by me with OSR NSW and its imperative that the Registered address for the Trustee company of each trust is in QLD and that the settlor is in QLD. If any doubt exists, it is the trustee company that may have penalties imposed for failing to pay duty. In some arrangements I have seen deeds stamped in more than one state.

A well known company formation group tried a scheme a few years back where they allowed you to appoint their (interstate) company under POA to settle the deed rather than in NSW. OSR NSW saw it as a scheme to avoid duty.

I have many clients who have had their structure advised + settled by Darryl. A good idea IMO if buying QLD property in a trust.

That said, the recent lender policy changes following APRA tighter rules are making it increasingly difficult for a trust to get lending approvals and there can be some impacts on accessing equity release for say Trust 1 to Trust 2 etc later since bank will ONLY lend to the trustee company. Equity release from Trust 1 across to Trust 2 poses a problem. If anyone is contemplating a trust I would strongly recommend a discussion with a broker familiar with the lenders and trust requirements before proceeding.

Tip : Minor changes to trusts can avoid the grouping provisions. ie appointors, even a guardian (controller etc) may differentiate one trust from another.

 

Interesting Paul.

NSW Duties act s58 is the relevant section for duty on trust set ups in NSW
http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s58.html

This has to be read against Chapter 11A - ss284C to 284J
e.g. s284E

Definitely where any party executing the deed is in NSW then NSW duty would apply.

 

A settlor in QLD who settles the trust and executes the deed makes a declaration of trust in QLD. No mention of trustee. Trustees tend not to declare a trust with a DT. And in examples I have seen the settlor gives a cheque which is drawn on a QLD bank. Not NSW property. Trustee Co with reg office in QLD.

The issue with using a POA in the earlier post was defeated as the POA was viewed as the declaration of trust not, the subsequent act of the attorney in the deed. (explained in my own words)

 

The trustee will also execute the deed, so the location of the trustee is important for duty purposes too.

 

Has there been any changes/reforms to QLD land tax legislation that would aggregate property holdings of an group with common ownership? I.e. one individual who own multiple companies that then each individually own a separate QLD property, having to aggregate the total value of those properties in the group for the purpose of assessment.

 

Not at present. However there can be indirect ways of impacting stamp duty if its not given legal advice.

 

Silly question, have you considered the accounting costs for additional trusts? Obviously this depends on the amount of $$$ you are investing.

 

The aggregation of trusts is an issue so listen to what the experts say in relation to that .

back in the early 200-'s we had 4-5 properties in one trust and paid no tax . If we did that now we'd have an issue .

If we were buying now , we'd want a different company as trustee for each trust to start with .

Cliff

 

I have said it before QLD land tax structure is a rort.
It isn't progressively tax at all.
So many company trustee for A trust must be setup to minimize land tax.

 

I have said it a long time but to date it hasnt changed. It wouldnt take much for QLD to follow the SA example and impose a grouping rule to companies, trusts etc. Using the multiple trust structure has a time bomb element to it but it hasnt occurred yet.

But it could happen next year or.......And I can hear the screams that will follow. Govt would call it an avoidance loophole and it would be easy to sell to the general public as a good law change.

The biggest limit to the strategy is neg gearing. A neg geared property wont be wise in a trust.