What happens when there's a change of ownership of a property owned under a trust?

There are many benefits to property ownership whether for lifestyle or future financial security.

Introduction

Property owners have several options available to them when deciding how to hold real estate in an asset portfolio, including by a trust arrangement.

This article below outlines what happens when there is change of ownership of a property owned under a trust.

What happens when there is a change of Trustee?

It is important that ownership details of a property are updated as soon as possible upon any change occurring with respect to a trustee of a trust. In our experience, it can be common for a trustee to retire with a new trustee appointed, however, the details of the registered proprietor of any property held under the trust are not updated to reflect the new ownership details and the issue is not discovered until the new trustee intends to sell the property or deal with the property in some other manner.

Generally, when a trustee of a trust is changed, for example from personal trustees to corporate trustees or vice versa, or even between corporate trustees or when an additional trustee is appointed, it is necessary to update the Title records for all properties held by the trust (as well as updating the ownership of other assets in the trust, such as bank accounts). Usually, transferring a property to a new proprietor would attract stamp duty. However, a stamp duty exemption pursuant to Section 33 of the Duties Act 2000 (VIC) is available subject to the provision of all relevant evidentiary documents to the satisfaction of the Commissioner of State Revenue. This involves lodging an application to the State Revenue Office.

Applying for a stamp duty exemption

For the application of the stamp duty exemption, the following documents are required to be provided on behalf of the trust:

  1. Deed of appointment of the new trustee and the deed of retirement of the retiring trustee.
  2. Stamped trust deed together with any subsequent amendments. (Note: An exception applies for Superannuation funds as such trust deeds are not required to be stamped).
  3. Stamped transfer of land to the retiring trustee.
  4. Title showing when the retiring trustee was registered on title.
  5. Council rates notice of the property being transferred.
  6. Financial statements of the trust showing when the property first became an asset of the trust.
  7. Last financial statements of the trust prepared prior to the transfer showing that the property is still an asset of the trust.
  8. Minutes of the retiring Company Trustee Director’s meetings showing the change of trustee.
  9. A statutory declaration by each of the retiring trustee and new trustee addressing a number of matters including whether there is any change of beneficial interest in the property and whether any consideration has been paid.

With the passage of time, the ability of the trust to obtain all the relevant documents for provision to the State Revenue Office may get more difficult. The trust may have changed advisors, a trustee may subsequently pass away or there may be changes to the directors of a trustee and the trustees at the time of the transfer of the property will be required to provide additional information and documents to address any gaps in available documentation.

Accordingly, all necessary steps should be taken as soon as possible. We recommend planning should be undertaken prior to completing the change of trustee, if possible.

How can Sharrock Pitman Legal assist?

Investing and divesting in property that is subject to a trust arrangement is a more complex process than regular property transactions. It is recommended to seek both financial and legal advice to ensure not only, that any tax liabilities met, but also that the details of the registered proprietor are kept up-to-date. Please feel free to contact our Property Law team for assistance with structuring a property portfolio through a trust arrangement. Please call 1300 205 506 or email property@sharrockpitman.com.au.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

For further information contact  
Shubha Rao

Shubha Rao is a Senior Associate in the Property Law team at Sharrock Pitman Legal.

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