Tax Tip 400: Changing Trustees can Trigger Stamp duty in NSW

Generally changing trustees will not trigger CGT and will not trigger stamp duty. However, under NSW law there is the possibility that a change of trustee can trigger stamp duty if the trustee holds property in NSW under some circumstances.

Duty will be triggered if the trustee holds dutiable property and the new or a continuing trustee is or can become a beneficiary under the trust. S54(3) Duties Act NSW

DUTIES ACT 1997 - SECT 54 Change in trustees


Example

Homer is the sole trustee of the Simpson Family Trust. Homer wants to borrow money to buy property, in his capacity as trustee but serviceability fails. Homer decides to add Marge as joint trustee.

The deed is not reviewed for the stamp duty implications.

Since the trust holds one property already the title of this property, which is currently in the name of Homer, needs to be changed to that of Homer and Marge. This would trigger just $50 duty normally.

But because Homer is a continuing trustee and a beneficiary of the trust their failure to amend the deed will mean full ad valorem stamp duty will be payable on the transfer of the property just like they have purchased it again. Marge is also likely to be a beneficiary of the trust so this would have triggered the duty too.

They would probably been better off with a company as trustee, but the deed would still have needed to be reviewed and it could still have triggered full duty unless there was a clause making future trustees excluded as beneficiaries.