The recent AAT decision in the case of Bendel and Commissioner of Taxation  AATA 3074 is in stark contrast to the ATOs longstanding position that an unpaid present entitlement of a corporate beneficiary constitutes the ‘provision of financial accommodation’ by the company to the distributing trust. […]
The Latest Legislative & Industry Developments Impacting Companies, Trusts and SMSFs.
Emily Pritchard, current as of: 28 September 2023.
Increased duty and 125-year vesting dates for trusts, broader electronic signing capacity for companies and additional guidance in relation to when a discretionary trust will be treated as foreign. These are just some of the recent legislative and industry updates in relation to companies, trusts and SMSFs. We’ve compiled a summary to help you stay informed.
Increased Duty for Discretionary Trusts, SMSFs & LRBAs in NSW
Duties Act 1997 (NSW)
The Treasury and Revenue Legislation Amendment Bill 2023 (NSW) was passed by New South Wales parliament on 21 September 2023. It amends the Duties Act 1997 (NSW) so that from 1 February 2024:
- Duty on the establishment of trusts over non-dutiable property in NSW increases from $500 to $750.
- Duty on the establishment of LRBAs in NSW increases from $500 to $750 (assuming additional conditions satisfied).
- Duty on transfers of dutiable property from custodian trustees to SMSFs increases from $500 to $750 (assuming additional conditions satisfied).
- Duty on transfers of dutiable property as a result of a change in trustee in discretionary trusts (assuming trustee excluded from being beneficiary) and SMSFs increases from $50 to $100.
125 year Vesting Dates for Queensland Trusts
Property Law Bill 2023 (Qld)
The Property Law Bill 2023 (Qld) (Property Law Bill), currently before the Queensland parliament, allows for the extension of a Queensland trust’s vesting date to 125 years from its establishment.
The vesting date for a trust is the date on which the trust ends, and on which the trust property is generally distributed to default beneficiaries if it hasn’t validly been distributed prior. This can have tax and duty consequences. The vesting date for a trust is usually stipulated in the trust deed and most often, is 80 years from the trust’s establishment (in line with current laws).
If the Property Law Bill is passed without amendment:
- The perpetuity period for a trust in Queensland will be up to 125 years from the date of the trust’s establishment.
- A trustee with the power under the terms of the trust to vary the vesting date will be able to vary the vesting date to a date up to 125 years from the trust’s establishment.
- Where a trustee does not have the power under the terms of the trust to vary the vesting date, the vesting date will be able to be extended to a date up to 125 years from the trust’s establishment, but only by deed executed by all of the beneficiaries of the trust and only if they are adults with full capacity.
Extension of Electronic Signing & Delivery for Companies
Corporations Act 2001 (Cth) (Corporations Act)
The Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2023 (Cth) passed both houses on 4 September 2023 and received royal assent on 14 September 2023.
It amends the Corporations Act 2001 (Cth) (Corporations Act), so that from 15 September 2023:
- Any document (including a deed) required or permitted to be signed under the Corporations Act can be signed physically or electronically. This essentially extends the range of documents that can be signed electronically, beyond those allowed by the 2022 changes to the Corporations Act, to include directors’ annual reports and declarations.
- Most documents required or permitted to be sent under the Corporations Act can be sent physically or electronically (subject to a recipient’s election). Unfortunately, these changes expressly exclude documents sent to ASIC or the Registrar, so the scope of ASIC forms that can be lodged electronically remains unchanged.
- Directors’ meetings can be called or held using any reasonable technology without the requirement for directors’ consent (subject to a company’s constitution).
ABRS (Australian Business Registry Services) Program Cancelled
The Albanese Government announced on 28 August 2023 that it will cease the Modernising Business Registers (MBR) program following independent review findings that the program could not deliver value for money, with massive budget and timeline blowouts and that the expected economic benefits of the program not justifying the revised costs.
The already implemented Director ID, aimed at assisting regulators in targeting illegal anti-phoenixing behaviour, will be unaffected.
When Discretionary Trusts will be liable for Foreign Surcharge Duty in Qld – Public Ruling
The Duties Act 2001 (Qld) imposes surcharge duty (additional foreign acquirer duty) where residential land is acquired by a foreign trust. A discretionary trust is a foreign trust if at least 50% of the trust interests (default beneficiaries) are held by foreign individuals, corporations or trusts (or those related to them).
Public Ruling DA000.14.4, issued 24 August 2023 and effective 28 August 2023, clarifies how interests of foreign persons will be considered when determining whether foreign persons hold at least 50% of trust interests.
It stipulates that:
- A discretionary trust will not necessarily be a foreign trust merely because one of its default beneficiaries is a foreign person.
- Whether a discretionary trust with a foreign person as a default beneficiary is a foreign trust will depend on the facts and circumstances of each matter. The Commissioner will consider the likelihood of distribution to a foreign person, taking into account the terms of the trust deed concerning any priority or proportion for sharing between default beneficiaries.
As always, the Acis team will stay across changes that impact companies, trusts and SMSFs to ensure our products and services remain industry leading.
Don’t hesitate to contact the team if you would like to discuss any of these or other matters further.