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Duty and the establishment of trusts
Emily Pritchard, current as of: 16 November 2022.
“An accountant, a conveyancer and a financial adviser walk into a bar…” Kidding.
Let me tell you, instead, what they really did. They all called Acis in the past week asking whether a trust established in Queensland needed to be “stamped” in New South Wales before it could acquire property there.
This is certainly not an uncommon question, but three times in a week is definitely unusual. In this article we’ll answer this and other questions relating to duty and the establishment of trusts.
Before we dive in, however, it’s important to understand that our discussions here are limited to:
- Liability to pay duty on the establishment of a trust. If a trust, post establishment, goes on to purchase assets or transact in other ways that incur duty liabilities, it will be assessed for duty. This is generally based on the State or Territory in which the transaction takes place or where the asset is located. It’s distinct from what we’re discussing, which is duty payable on the establishment of a trust.
- Trusts established over non-dutiable property. This article is not intended to provide guidance in relation to the establishment of a trust over dutiable or identifiable property. Rather, we’re discussing the liability for duty of a trust established over non-dutiable or unidentifiable property only. In most cases this will be the nominal $10 (or similar) Settlement Sum.
Question: Does a trust established in Queensland need to be “stamped” in New South Wales before it can acquire property there (NSW)?
Duty on the establishment of a trust is almost always determined by where the trust deed is signed. The New South Wales Duties Act only imposes duty on the establishment of a trust over non-dutiable property if the instrument (trust deed) is “executed in New South Wales”. If a trust deed is wholly executed in Queensland, no duty should be payable in New South Wales in relation to its establishment – the New South Wales Duties Act cannot “capture” the act of establishing the trust as the trust deed was not “executed in New South Wales”.
If the trust goes on to acquire property in New South Wales, then duty will be payable on that acquisition in New South Wales. This is distinct, however, from duty payable on the actual establishment of the trust.
Question: If the trust deed for a trust that was established in New South Wales stipulates that the Jurisdiction or Applicable Law for the trust is Victoria, is there a Victorian liability to pay duty on the trust’s establishment?
Any duty on the establishment of a trust is almost always determined by where the trust deed is signed (Place of Settlement). The Jurisdiction of the trust, or Applicable Law as it is sometimes referred to, has no impact on duty that may or may not be payable on the establishment of a trust. The Jurisdiction or Applicable Law is the election of a jurisdiction in which any disputes between the Trustee and Beneficiaries will be determined. It is not relevant to the determination of duty payable on the establishment of a trust.
|Duty payable on trust establishment
($10 Settlement Sum)
|New South Wales
Section 58 Duties Act (NSW) 1997
Section 37 Duties Act (Vic) 2000
|Australian Capital Territory
Item 2, Schedule 1 Stamp Duty Act (NT) 1978
|Acis does not provide advice in relation to commercial law, taxation, duty, company law or any other matter. We do not purport to provide advice nor should you construe anything in any correspondence with us, or material provided by us, as advice of any kind.