With only one more sleep until another 30 June is upon us, it seemed timely to remember that all Australian jurisdictions except for South Australia have a statutory perpetuity period of 80 years. In Victoria, Tasmania, Western Australia and the Northern Territory, the common law perpetuity period may also be adopted, that is ‘a life in being plus 21 years’.
Despite South Australia essentially abolishing the rule against perpetuities, section 62 of the Law of Property Act 1936 (SA) allows the court to dispose of any remaining unvested interests after 80 years on the application of a beneficiary.
Generally, when trust to trust distributions are made, the vesting date of both trusts should be considered. Where a recipient trust has a vesting date which is later than the distributing trust, the risk that the rule against perpetuities is breached is a particularly relevant issue.
Historically, many advisers believed that if the vesting date of the recipient trust was later than the distributing trust, then this automatically caused a breach of the rule against perpetuities, making the purported distribution void.
However, the case of Nemesis Australia Pty Ltd v Commissioner of Taxation [2005] FCA 1273 confirmed that the ‘wait and see rule’ in each jurisdiction can be relied on in a situation where a trust distributes to another trust with a later perpetuity date.
The ‘wait and see’ rule means the initial distribution will not be void when made, and will not become void until such time as there is a failure to distribute out of the recipient trust before the vesting date of the original distributing trust.
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** for the trainspotters, ‘Sometimes’ is a song by the Carpenters. View hear (sic):