Tuesday, March 8, 2016

Corporate Trustee Duty – A Practical Example

Earlier posts have looked at various aspects of corporate trustee duty – see http://blog.viewlegal.com.au/2010/06/corporate-trustee-duty-part-2.html

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers some related practical issues in relation to corporate trustee duty and trust splitting in Western Australia and Queensland in a ‘vidcast’ at the following link - https://vimeo.com/143839535

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –

If, for example, you've got your mum and dad as the shareholders in a trustee company, and as part of the trust splitting arrangement, you're wanting to actually transfer the shares in that company, because you're wanting to transfer the ultimate control, what the stamp duty offices may do is notionally deem the value of that company to be exactly equal to the value of the assets inside the trust.

Effectively this creates a situation where, even though that’s invariably only a $2 company, for stamp duty purposes, the shares in the trustee company will be notionally deemed to be the same value as the family trust, and the shareholders will pay stamp duty on that value.

There are exemptions to that outcome, but the starting point is that it is dutiable.

If you're not aware of this risk and you've had clients enter into one of those transactions, you need to become very aware of it, because there's now data matching between the Australian Securities Commission and the revenue authorities in both WA and Queensland. Therefore if you do your share transfer and process it through ASIC and haven't lodged that with the Stamps Office, you'll likely get a letter from the Stamps Office saying ‘please explain’.