Trustee as property owner in Victoria

Discussion in 'Legal Issues' started by casuarina, 20th Nov, 2021.

Join Australia's most dynamic and respected property investment community
  1. casuarina

    casuarina Member

    Joined:
    19th Jan, 2018
    Posts:
    23
    Location:
    VIC
    In Victoria, Section 37 of the Transfer of Land Act 1958 does not allow the registrar to record the name of the trust in the register.

    As such, if XYZ Pty Ltd as trustee for the XYZ Discretionary Trust is to buy a property, then

    (a) in the Contract of Sale, the purchaser is shown as "XYZ Pty Ltd";
    (b) after the settlement, the title document records the owner as "XYZ Pty Ltd".

    So how can one tell whether the property is owned by the company in its capacity of trustee for the trust or by the company itself? Essentially where to record the name of the trust in this kind of property transfer and ownership?
     
  2. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    The trustee could
    a) indicate they are acting as trustee on the contract
    b) put the trust ABN on the contract
    c) should have trustee resolutions to buy the property
    d) trustee should be borrowing deposit and rest of the purchase price
    e) tax returns reflect the income
    f) income into the trust bank account
    g) trustee have no other assets
     
    HaigJames, casuarina and qak like this.
  3. Paul@PAS

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

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Settlement evidence is also favourably viewed. Many people use apparent purchaser rules to LATER seek to fix a title and OSR will seek evice of how settlement was effected and who paid. Ideally accounting should be consistent with the trust views. Problems can arise when Fred settles the property and the trustee doesnt seem to pay anything. Fred then says " I lend funds to the trustee company" but there is no such evidence. Is the trust an apparent purchaser and Fred will later claim HE is the benefical owner ? rather than the trustee company ?

    I am endlessly asked if a trustee "needs" a bank account as it costs time and money to move funds about. It could be a costly mistake to NOT settle a property properly. You spend all the $$$ on advice, trust setup and then short cut the settlement ? Makes no sense. The other issue is that the trust MUST have property (assets incl cash, bank acocunts etc) PRIOR to the settlement or ..is there even a trust ? That could produce some duty concerns.

    And dont fail to get a deed stamped either. If the issue of a valid trust comes up and stamping wasnt addressed you may not get a favourable decision.

    A trust that only buys residential property wont have and shouldnt have a ABN. Thats no issue. All other ancillary records will still support the view. A ABN isnt proof if an event. It is a mere registration.

    I came across a curly one a year or so back. Trustee co was owner. However the land tax assessments for 3 years were incorrectly issued to a trust (I noted no threshold) when OSR pinged the entity for being unregistsred. It was durting tax work that I looked at the land tax and needed to consider why it was so high. OSR had registsred owner as a trust not a company doing a dev. Not that of the trust. Took evidence to prove that to OSR that no trust was involved and involved proof of settlement and the accounting records and financials and tax and bank accounts and more. Took afew days. A refund of a large overpayment of land tax too that the owner hadnt picked up. $33K !! Ironically the refund of land tax was made out to the trust but had been paid by company and that took some arguing to resolve.
     
    casuarina likes this.

Build Passive Income WITHOUT Dropping $15K On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia