Urgent: Changes to NSW Stamp Duty Remove Duty Concessions on Change of Trustees

We thought you needed to know about some recent changes to the NSW Duties Act which could affect any advice you provide about changing the trustees of an SMSF.  We may have also provided Change of Trustee documents for you in the recent past and if you haven’t yet processed those documents you may want to consider this advice before doing anything further.

The NSW Government has amended the Duties Act to remove the $50 duty concession in respect of changes of trustees of an SMSF.  Accordingly if the trustees of a self-managed super fund are changed and cannot meet the criteria set out in s.54(3) of the Act, FULL AD VALOREM DUTY will be payable on the transfer of any dutiable property as a result of the change.

These changes affect super funds based in NSW or based elsewhere but with dutiable property in NSW.

“Dutiable property” can generally be summarised as land, private company shares, units in a unit trust, business assets, statutory licences, an interest in a partnership and a number of other specific matters.  If you are in any doubt whether a specific instance qualifies then you need to contact us.

To enjoy the $50 stamp duty concession and not pay full ad valorem rates of duty there are three criteria which must be met and which can generally be summarised as:

• none of the continuing trustees (remaining after the retirement of a trustee) can be or become a beneficiary under the trust, and
• none of the new trustees can be or become a beneficiary under the trust, and
• the transfer is not part of a scheme to avoid these provisions.

The only way that a self-managed super fund can meet these criteria is if the new trustee is a company and therefore the only trustee of the fund.  A company cannot be a beneficiary of an SMSF and so therefore can meet the criteria.

If the continuing trustee and or the new trustee is an individual then clearly the requirements cannot be met because individual trustees of an SMSF must also be members (ie beneficiaries) of that SMSF.

What to do?

• If you have only partially completed a Change of Trustee process, freeze the process and contact us.
• If you want to change the trustee of an SMSF at any time, make sure the new trustee is a company.
• If you are establishing a new SMSF, you can set it up with individual trustees and potentially make use of the s.62A concession for transferring property into a fund for the benefit of the transferor, but do so in the knowledge that if at any stage in the future you want to change the trustee effectively the only change that can be made is to appoint a company as trustee.

Given that these changes are only recent there are no indications as to precisely how it will be administered except as set out in Revenue Ruling DUT 37 (which was issued before the recent change). You can access a copy of that ruling from the NSW Office of State Revenue website.

You should note that these rules apply in respect of discretionary trusts and unit trusts also. In those cases the terms of the trust deed may need to be amended to prevent the trustee(s) from ever being a beneficiary.

We hope that you have found this advice of interest.  Please note that the advice in this email is of a general nature only by way of an alert and you should not rely on it nor take any specific action (including omitting to do something) until you have confirmed your action with us and received our specific advice.

Visit the SUPERCentral product range if you would like more information on Change of Trustee documents.

Please don’t hesitate to contact our Superannuation Special Counsel Michael Hallinan or Peter Townsend on 02 8296 6222 with any queries.