In Brief
Since 1 July this year, full stamp duty has been payable on the death or retirement of an existing trustee and appointment of a new trustee to a self-managed super fund (SMSF), if the remaining or new trustee is a beneficiary and the fund owns dutiable property.
To avoid unnecessary duty implications under the new regime, legal advisers would do well to encourage clients to have all SMSFs reviewed with a view to appointing a corporate trustee and including a non-revocable clause precluding the corporate trustee from becoming a beneficiary.
The State Revenue Legislation Amendment Act 2010 (SRLA Act), which came into effect on 1 July 2010, amended the definition of "special trustee" in s.54 of the Duties Act, so a special trustee must now fall within the definition of a trustee of a complying superannuation fund as defined in s.42 of the Superannuation Industry (Supervision) Act 1993.
An entity is a complying fund in relation to a year of income if it was not a SMSF at any time during that year. The effect of the amendment is that the trustee of a SMSF is no longer defined as a special trustee for the purposes of s.54(2) of the Duties Act, which provides for nominal duty on a transfer of dutiable property between special trustees.
To apply for nominal duty, we must now rely on s.54(3) of the Duties Act, which provides that duty of only $50 is payable on the change of a trustee, if three conditions are met:
- none of the continuing trustees remain and can become a beneficiary of the trust;
- the new trustee cannot become a beneficiary of the trust; and
- the transfer is not part of a scheme for conferring an interest in relation to the trust property on a new trustee or any other person to the detriment of any beneficiary
If any of these three requirements cannot be met, full duty is paid on the transfer.
Each SMSF must have a minimum of two individual trustees at any time. Many individuals who are beneficiaries of an SMSF have themselves appointed as trustees, and it is common for a married couple to act as trustees in a two-member fund.
The effect of the SRLA Act is that on the death of one of the trustees, full stamp duty will be payable on the appointment of a new trustee if the remaining or new trustee is a beneficiary under the SMSF and the fund owns dutiable property.
Dutiable property is defined in s.11 of the Duties Act and includes land, business assets, units in a unit trust scheme and shares in a NSW company.
To be able to meet the requirements of s.54(3) of the Duties Act, all new SMSFs should now have a corporate trustee and be drafted to include a non-revocable clause precluding the corporate trustee from becoming a beneficiary.
On the retirement or death of a trustee of an existing SMSF, the transfer to a new trustee will not be liable for full duty if the remaining trustee retires and a new corporate trustee is appointed. In such an event, the existing SMSF would need to be amended to include a non-revocable clause precluding the corporate trustee from becoming a beneficiary.
