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Declaration of trust relating to non-dutiable property

Under section 58(1) of the Duties Act 1997, the instrument declaring the trust is liable to duty in New South Wales in the following instances:

  1. the document has been executed in NSW, and
  2. the declaration is over NSW property, none of which is dutiable property. For a full list of dutiable property refer to section 11 of the Act.

Typically, non-dutiable property is described in the trust document as a settled sum, usually an amount of money, and is considered NSW property if it is held in a NSW bank account.

Below are some examples of a declaration of trust over non dutiable property.

Example 1 – Discretionary/Family Trust

Example of an instrument declaring a trust over non-dutiable property

This deed is made on xx/xx/xxxx

Between: The Settlor

And: The Trustee

Recitals:

  1. The Settlor intends by this Deed to establish a trust to be applied and administered for the benefit of the Beneficiaries.
  2. The Settlor has paid, or will pay, the Settlement Sum to the Trustee and the Trustee has consented to hold the Trust Fund upon the terms contained in this Deed.
  3. The Trust constituted by this Deed will be known by the name in Item 6 in the Schedule.

Example of a schedule in an instrument declaring a trust over non-dutiable property

SCHEDULE

  1. Date of making this deed: xx/xx/xxxx
  2. The Settlor: Person A
  3. The Trustee: AAABBBCCC Pty Ltd
  4. The Settled Sum or Property: $10.00
  5. Vesting Date: The last day of the Perpetuity Period applicable to this Deed
  6. The specified Beneficiaries: Person B
  7. Trust Name: AAABBBCCC Family Trust
Example 2 – Unit trust

Example of an instrument declaring a trust over non-dutiable property

This deed of trust is made on xx/xx/xxxx

Between: The Party described in Item 2 of the Schedule to this Deed of the one part (“the Trustee”)

And: The Party described in Item 1 of the schedule of this Deed - Person A (“the initial unitholder”)

Recitals:

  1. Person A is the initial unit holder.
  2. The initial unit holders as set out above and more particularly described in Item 1 of Schedule A has requested the Trustee to act, and the Trustee has agreed to that request, to act as Trustee of the Trust constituted by this Deed.
  3. The initial unit holders have agreed to take up the number of units set out in item 3 of Schedule A and have each paid or shall pay on execution of this Deed in respect of the units the amounts per unit and set out in Item 3 of Schedule A.

Example of a schedule in an instrument declaring a trust over non dutiable property

SCHEDULE A

Item 1

Initial Unitholders – Person A

Item 2

Trustee – Trustee A

Item 3

Initial Unit Capital -

10,000 ordinary units of $1.00 each (income, capital and voting rights)
10,000 preference units of $1.00 each.

Processing and lodgement requirements

The above transactions must be processed through EDR – Refer to Chapter 4 - Processing and lodgement requirements.

Declaration of trust relating to unidentified property

Under section 58(2) of the Duties Act 1997, the instrument declaring the trust is liable to duty in NSW if the instrument is executed in NSW and establishes a trust over unidentified property. For example, the trust is established to acquire, secure or hold monies or documents.

Processing and lodgement requirements

The above transactions must be processed through EDR - Refer to Chapter 4 - Processing and lodgement requirements.

Instruments taken to be executed (signed) in NSW

An instrument is taken to be executed or signed in NSW when the instrument is physically signed in NSW i.e. wet signature.

If the instrument is electronically signed under the Electronic Transactions Act 2000, under section 58(2A) of the Duties Act 1997, it is taken to have been executed in New South Wales if -

  1. for a trustee of the trust that is a corporation—the trustee’s registered office or principal place of business is in New South Wales, or
  2. for a trustee of the trust that has an ABN—the trustee’s registered business address is in New South Wales, or
  3. otherwise—the principal place of residence of the trustee of the trust is in New South Wales.

Processing and lodgement requirements

These transactions must be processed through EDR – Refer to Chapter 4 - Processing and lodgement requirements.

Declarations of trust not subject to NSW duty

In the following circumstances, the trust deed is not subject to NSW duty:

A declaration of trust over marketable securities (shares)

Under section 58(6) of the Duties Act 1997 a declaration of trust over marketable securities is not dutiable if the marketable security is not dutiable property.

Ad valorem duty may be payable if the marketable securities are considered dutiable property in the following circumstances:

  1. they are a land-use entitlement pursuant to section 11 of the Duties Act 1997, or
  2. they are liable to duty under the landholder duty provisions of the Act.

For more information on Landholder duty, you can visit the Revenue NSW website.

See also Chapter 4 of the Duties Act 1997 - Acquisition of interests in landholders.

An instrument establishing a superannuation fund

Duty was abolished on this instrument from 1 July 2001.

Prior to this date, duty of $20 was payable under section 60 of the Duties Act 1997.

Cautions

The information below is provided to prevent common assessment and processing errors identified by Revenue NSW under this document type.

Declaration of trust over dutiable property

Fixed duty under section 58 of the Duties Act 1997 only applies to a declaration of trust relating to non-dutiable and unidentified property.

A declaration of trust over dutiable property is a dutiable transaction as defined under section 8 and section 11 of the Duties Act 1997 and may be liable to ad valorem duty.  It does not matter if the dutiable property is not vested in the person declaring the trust at the time the trust is declared.

Dutiable property is typically identified in the document as a Lot and SP/DP, or a property address.

Below is an example of dutiable property contained in a declaration of trust

SCHEDULE

  1. Date of making this deed: xx/xx/xxxx
  2. The Settlor: Person A
  3. The Trust:  AAABBBCCC Pty Ltd
  4. Trust Property: 110 Sample Street, Sydney NSW, 2000 DP 1/2345
  5. Vesting Date:  The last day of the Perpetuity Period applicable to this deed
  6. The specified Beneficiaries: Person B
  7. Trust Name: ABC Family Trust

Processing and lodgement requirements

These transactions must be submitted through eDuties – Refer to Chapter 4 - Processing and lodgement requirements.

Superannuation trusts: Section 62B of the Duties Act 1997

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).

The trust document that is set up to formalise the arrangement is often referred to as a bare trust, custodian trust deed or instalment warrant.

These transactions may be eligible for a fixed rate of duty pursuant to the requirements of section 62B of the Duties Act 1997 and must not be processed under the document type ‘Trust Deed’.

For more information on the requirements when assessing and processing these transactions, refer to the EDR assessing guide – Declaration of trust by custodian – Section 62B.

Processing and lodgement requirements

If all requirements are met, these transactions must be processed through EDR under document type 'Superannuation trust'.

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