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Declaration of trust by custodian

This EDR assessing guide is provided to assist industry professionals understand the requirements when self-assessing and processing transactions using EDR.

For a comprehensive understanding, it is recommended that this guide is read in its entirety.

Chapters

  1. Overview
  2. Supporting information
  3. Assessing transfer duty
  4. Processing and lodgement requirements
  5. Record keeping and audit

1. Overview

On this page

The Superannuation Industry (Supervision) Act 1993 (SIS Act) under section 67A, allows trustees of complying self-managed super funds (SMSF) to take out loans to purchase investment properties for the fund but only if the property is being held in trust by a third party (often referred to as a custodian or bare trustee).

These arrangements are documented by trust deeds (the declaration of trust) executed by the custodian/bare trustee and the trustee of the self-managed super fund.

Transactions that are typically assessed in accordance with this section are often referred to as:

  • bare trust deeds, or
  • custodian trust deeds, or
  • instalment warrants.

The overall effect of this arrangement is that the custodian/bare trustee will be the apparent purchaser of the property being purchased under the arrangement (legal owner) and the trustee of the SMSF will be the real purchaser of the property being purchased under the arrangement (beneficial owner).  

Under section 62B of the Duties Act 1997, duty of $750 is chargeable on a declaration of trust made by the custodian if specific criteria is met as detailed under Chapter 3 – Assessing transfer duty.

Duty of $500 will be charged on a declaration of trust by custodian entered into before 1 February 2024.

For the purposes of this guide, the following terms all have the same meaning and refer to a complying self-managed super fund:

  • self-managed super fund
  • superannuation fund
  • SMSF.

Liability date

The instrument (declaration of trust) is liable to duty from the date of its first execution, as specified in section 12 and section 295 the Duties Act 1997.

Liable party

In accordance with section 9 of the Duties Act 1997, duty is payable by the person declaring the trust (the custodian/bare trustee).

Duty payable

In accordance with section 17 of the Duties Act 1997, duty is payable within three months from the liability date.

Calculating interest

If payment is made after the due date (i.e. 3 months after the liability date), interest will be payable. In addition, penalty tax may be payable.

Interest is calculated daily from the end of the due date until the day duty is paid.

For further information about the current interest rates, refer to Interest and penalty tax.

To calculate interest, you can use our interest calculator.

For more information, see Part 5 of the Tax Administration Act 1996 No 97 (TAA).