Corporate trustee duty (part 2)

Last week, I mentioned the unique way in which the Queensland stamp duty rules can operate in relation to the transfer of shares in companies that act as trustees for discretionary trusts.

As touched on last week, the provisions are such that the transfer of shares in these companies can be charged with standard stamp duty rates based on the underlying market value (ignoring any debt) of the dutiable assets in the discretionary trust located in Queensland or Western Australia.

In Queensland there is however the ability to legitimately avoid this stamp duty cost, if the transaction comes within an exemption set out under the stamp duty rules.

Broadly these rules provide that so long as the transfer of shares is between individual members of a family group, and the trust is established primarily for the benefit of members of that family, then there will be no duty payable.

As the ability to access the stamp duty relief is subject to the discretion of the Stamps Office, there is the ability to get an indication on whether stamp duty relief is likely to be available and with the client that I mentioned last week, we have submitted a ruling application on their behalf.

If an unfavourable ruling is received, we will need to explore other, less commercially appropriate, alternatives to achieve the client’s overall objectives.

Until next week.

Matthew Burgess

Trust deed tip

Again this last week, we have had some more issues arise in relation to family trusts.

As is often the case, the issue from this week was identified by a financier.

The issue arose due to a review of some historical variation deeds to the original trust documents.

Due to a relatively unusual provision, the original trust required that any variation could only be made with the consent of the settlor (i.e. the person who originally set up the trust) and all of the 'primary' beneficiaries who were set out in the schedule to the trust.

None of the earlier variations had received consent from any of the relevant parties.

The solution (which is still to be approved by the bank) was to implement a comprehensive deed of confirmation and obtain signatures from all relevant people – fortunately, the settlor was still alive and willing to assist.

Next week, I will touch on some other practical difficulties that we are going to need to consider and possibly address in the future.

Until next week.

Matthew Burgess

Testamentary trusts - is it ever too late?

As you may recall from previous posts, there are significant advantages of utilising a testamentary discretionary trust (TDT) as part of an estate planning strategy.

We often receive queries from clients asking whether it is possible to establish a TDT to receive estate assets after a person's death.

While establishing a TDT in a person's will is by far the simplest approach, it is possible for an estate proceeds trust (or post-death TDT) to be established following a person's death to receive the estate assets.

Any property received from the estate may be transferred to an estate proceeds trust (EPT) within three years for the date of death, provided the trust is structured to satisfy the requirements in the tax legislation. 

The summary about EPT on the View Legal website is available via the View Legal website (www.viewlegal.com.au) via the core services section and explains the requirements in further detail.

Practically, the area where we see the biggest demand for estate proceeds trusts is in relation to receiving insurance proceeds from life insurance policies.

Matthew Burgess

Trust distributions 101 - Read the deed!

Last week, an accountant and I caught up in relation to his review of trust distributions in previous years for a new client to his firm.

The main issue related to income that had been passed to a company over a number of years.

While the trust deed allowed distributions to companies, it had a relatively unusual provision that required all of the shares in that company to be owned by the 'primary beneficiaries' set out in the schedule.

Unfortunately the company that had been used had a share structure that did not comply with the provisions of the deed and we were trying to explore if there were some potential solutions available.

Each idea we have come up with to date has not been particularly satisfactory, so this week’s practical tip is simply to remember to ensure that whenever working with trust someone is made responsible to 'read the deed’.

Until next week.

Matthew Burgess

Deeds of variation and stamp duty

As I flagged in my last blog posting, we had a very difficult day recently – all triggered by a simple typo in the schedule to a trust deed.

One aspect that proved unnecessarily difficult due to the particular approach of the relevant bank officer was in relation to stamping.

Most Australian states (and particularly Queensland where this transaction was taking place) do not require administrative type changes to trusts to be charged with stamp duty.

In fact, in Queensland, recent changes have been made by the Stamps Office to actively discourage people from lodging these types of documents for assessment, given that the assessment is going to be returned as no duty payable.

Essentially then the only types of trust variations that need to be lodged for assessment in Queensland are ones that historically have been loosely described as 'resettlements'.

Practically, there is in fact no definition of a resettlement under the stamp duty rules and instead there is a series of other, relatively technical, provisions that need to be considered. For those interested in the general way in which these rules operate, please let me know and I can direct you to the relevant parts of the Stamps Office website.

Until next week.


Matthew Burgess

Typos and big legal bills

Given Monday is a public holiday, the Blog for next week is posted below.

Yesterday ended up being a very long day and unnecessarily expensive (both in terms of time consumed and bank, accounting and legal charges).

The day was also a particularly frustrating one due to the relatively underwhelming cause of all the hassle – a typo in an on-line created trust deed.

While the typo was not ours, it served as an extremely timely reminder of how critical it is to get even the simple things right.

For those that attended our Master Class on trusts a few years ago (our Master Class series is run once a year and is a half day program built entirely around a practical case study), you may remember one of the examples (based on a real life situation) where the vesting (or ending) date of a trust was accidentally noted as 18 years instead of the more standard 80 years.

Yesterday, the error (which had been generated by a client’s former accountant using an online trust provider) was simply the spelling of the name Stephen with a 'v' instead of the 'ph' in the schedule.

While the trust had borrowed money from the bank before, no one had ever picked up on this typo.

Yesterday was the settlement day for a relatively large transaction and mid morning a Sydney bank officer identified the typo and insisted that the bank security could not be perfected because of it until the error was remedied.

After much (often quite illogical) negotiation, the bank finally agreed to a deed of variation being implemented.

As is often the way in these situations however, the deed (which ran to less than two sentences of actual substantive terms) was redrafted three times to satisfy the precise requirements of the bank.
Furthermore, even having produced the deed, there was the threat of the bank refusing to settle unless it was stamped prior to settlement.

The irony here of course is that the particular form of document is not liable to stamp duty in Queensland and due to recent changes at the Stamps Office trying to discourage people to lodge these documents for duty assessment (I might touch on this in more detail next week), it was going to be impossible to achieve a same day stamping.

Finally, based on a written undertaking provided by us, the bank did agree to settle.

Until next week.
Matthew Burgess

Bamford - What exactly does it mean?

As many of you will be aware, we have updated our Intensive program over the last few weeks to include some initial comments on Bamford.

The Intensives have fully booked out and we are therefore also putting on some Wednesday Night Forums shortly which will focus exclusively on Bamford and the unpaid present entitlement ruling from the end of last year.

One very practical issue that has been raised regularly over the last few weeks has been in relation to trust deeds. In this week’s post, I thought I would list out the answers to some of the most frequently asked questions in this regard.

1. Are View Legal deeds 'Bamford compliant' – every trust deed provided by View Legal is Bamford compliant.

2. Are trust deeds from other providers Bamford compliant – this is an issue that will need to be assessed on a case by case basis. Certainly the older the deed, the less likely it is to be compliant. There are also a number of non tax specialist deed providers who have not traditionally focused on some of the critical issues raised in Bamford.

3. Should we be looking to do wholesale updates of all trust deeds in our client base (similar to the recent super deed updates completed) – subject to the exact approach the ATO adopts in the decision impact statement that is due to be released shortly, we believe there is likely to be some benefit in at least conducting a full review of all deeds.

4. Are there standard distribution minutes available – as many of you will be aware, we have always been conservative in our approach to distribution minutes and strongly recommend that every trustee should independently consider both the trust deed and the exact nature of distributions on a year on year basis (in other words, not use a 'standard' minute).

Certainly given the confirmation of the proportionate approach, the crafting of minutes so that (for example) infant beneficiaries get a set dollar amount and then the balance goes in certain percentages will rarely (if ever) be appropriate.

We are already working with a number of accounting practices to develop an approach that suits the risk profiles of their clients.


Until next week.

Matthew Burgess