In brief
VCAT (the Tribunal) reinforced the position(1) that transfers in relation to property passing to unitholders in a trust scheme are not automatically exempt from transfer duty.
The facts
- Between 1985 and 1996, Savantail Pty Ltd (Trustee) – in its capacity as trustee of Wandin Valley Farms Unit Trust (Trust) – acquired three properties located (Relevant Properties).
- On 18 April 2016, the Trustee transferred the Relevant Properties to Lincara Pty Ltd (Lincara). At the time of the transfers, Lincara was the sole unitholder of the Trust, and held its units in its capacity as trustee of the G & E Sebire Superannuation Fund (Super Fund).
- On 29 June 2016, the Commissioner of State Revenue (Commissioner) assessed Lincara to duty of $412,500 in respect of the transfers.
- On 26 August 2016, Lincara lodged an objection claiming that the transfers were exempt from duty under section 36B of the Duties Act 2000 (Duties Act), which applies to property passing to unitholders in a unit trust scheme.
- The objection was disallowed by the Commissioner on 24 November 2016 on the basis that the requirements of section 36B were not satisfied. It is that decision that was referred to VCAT.
The Court
The key issue in this decision was the meaning of ‘relevant time, which turned on when the dutiable property ‘first became subject to’ the unit trust scheme. The Tribunal applied the plain and ordinary meaning in this instance and determined that it was clear that the relevant time was when the Trustee acquired each of the Relevant Properties and as this was prior to the acquisition of any units in the Trust by Lincara. In addition, as the two Relevant Properties were acquired before the Super Fund was established, it would be impossible for members of the Super Fund to have been members at the ‘relevant time’.
There was no evidence that the beneficiaries of the Super Fund at the time of the transfer were the same as the beneficiaries in September 2007 as required to satisfy section 36B(2)(c).
The Tribunal then turned to whether there was any basis to adopt a broader interpretation of the words used in s36B and this was also denied. The Tribunal also reinforced the supposition that a change in the composition of the beneficiaries of a Trust does not have the effect of ending the Trust.
Comment
This case is a reminder to be mindful of the possible transfer duty implications when transferring Property between Trusts. The decision held that ‘relevant time’ should be interpreted in accordance with its plain and ordinary meaning and therefore the date upon which a transfer occurs will have a significant impact on the duty required to be paid.
(1) Lincara Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2018] VCAT 1060
