Tax Tip 380: Declarations of Trust and Stamp Duty

A declaration of trust over dutiable property is a dutiable event and will trigger ad valorem duty just as a transfer of title would.


Example

Homer holds 3000 CBA shares in his own name. He does a declaration of trust and says he now holds those shares in his capacity as trustee of the Homer Simpson Trust.

Shares are no longer dutiable property, so this is not a dutiable event.



Homer also owns 123 Smith Street.

He declared that he now holds this as trustee for the Homer Simpson Property Trust. Land is dutiable property so this would trigger stamp duty even if there is no transfer of title.


For NSW law see

S 8 Duties Act 1997

DUTIES ACT 1997 - SECT 8 Imposition of duty on certain transactions concerning dutiable property

S 11 Duties Act 1997

DUTIES ACT 1997 - SECT 11 What is "dutiable property"?

 

I encountered someone who didnt have their stamped deed when requested given guidance by a former accountant. They (mistakenly) sent OSR a unsigned copy when asked about land tax. OSR wanted to impose transfer duty on the trust settlement as the property settled the trust in their view. ie Double duty. They sought my guidance so I suggested a solictor who knows duties well as it is legal advice. Legal advice was there was no declaration of trust pertaining to the property and to maintain that assertion and OSR relented. The sum settled for the trust needed a stat declaration as to the sum settled in cash and held in cash. However now the property remains owned by the Co.

 

Is it a CGT event?

 

Tax Tip 192: Declarations of Trust and CGT Tax Tip 192: Declarations of Trust and CGT

 

Homer decides to periodically buy (let's say) VAS shares to hold long term in the Simpson Discretionary Trust.

Homer purchases a parcel of said VAS, each time just prior to going ex-div and (usually) declining in value. Once the dividend is attributed to him, he does the Declaration of Trust, and likely books a capital loss.

The long-term shares are accumulating in the trust, and Homer is getting a small dividend income offset by some on-paper capital losses.

As a thought experiment, what have I missed here?

 

The 45 day rule?

 

Ha, I just KNEW there would be something. It's almost like people far smarter and knowledgeable than me have thought this stuff through ages ago.

Foiled again!

Thanks @Terry_w

 

• The CGT on Homers disposal and why he isnt doing a offmarket transfer to a different (trust) entity HIN.
• The accounting for the apparent trust.
• 45 days rule
• Does the trust need a family trust election

People should never prepare a declaration of trust without legal and tax advice.

In the question asked why would Homer need a declaration of trust if the trustee is already aquiring these assets in the disc trust ? A declaration of trust is only made over non-trust property. A smple off market transfer inspecie as a loan / gift will also acheieve the same. And avoid clawback periods by a spouse for example.