Distributing assets from a family trust to a beneficiary – no stamp duty in SA

Holding assets in a discretionary family trust can be a good idea for a number of reasons, including asset protection, taxation and succession law benefits. However, from time to time these structures get old and no longer serve any useful purpose. At this time, you may want to move any assets out of the family trust and into someone’s own personal name.

The good news is that in South Australia this can often be done without the imposition of significant stamp duty.

First, stamp duty only applies to a limited range of assets. Most notably residential and rural property. So if you are moving business assets, shares or commercial property, you can already do this largely stamp duty free, (noting that duty on commercial property is eliminated from 1 July 2018).

A transfer of residential property will generally attract stamp duty which can range. However, if you are transferring the property from a family trust to a family member, then an exemption is available (see section 71(5)(f) of the Stamp Duties Act 1936 (SA) (the Act)). This is often referred to as the ‘in specie transfer exemption’, because the family trust transfers the property to the beneficiary ‘in specie‘ i.e. in its ‘actual form’ or ‘current state’. To qualify, the beneficiary must be a member of the family group for whom the trust is created, and the instrument creating the trust (usually the ‘trust deed’) must be duly stamped.

RevenueSA accepts that this exemption can also be used in the context of a broader ‘multi-step’ restructure. For example, if you want to move rural land out of a generic family trust then into a qualifying ‘land trust’ or your self-managed superannuation fund (see the exemption in section 71CC of the Act). The reason you would not be able to do this restructure in one step (i.e. directly from the family trust and into the new land trust) is because a generic family trust will not usually qualify as an eligible transferor under the section 71CC exemption (because the definition of potential beneficiaries of the family trust is usually too wide).

Another question that often arises is whether the property can be transferred subject to an existing mortgage, i.e. the property and the existing mortgage passes to the beneficiary who assumes responsibility for the debt. It is our understanding that RevenueSA will accept such a transfer. This means that a property does not need to be unencumbered to be able to be transferred under the duty exemptions. (This can be contrasted with the exemption applying to in specie distributions from a company in liquidation.)

Call us on 1300 654 590 or email us to discuss how to ensure you are holding your assets in the most effective way.

The information contained in this post is current at the date of editing – 11 April 2023.

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