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Sections: s36A (1)(d)

Lodgement category: ELM

Circumstances/Transactions:

A transfer from a discretionary trust (the trust) to a beneficiary absolutely where the beneficiary is a corporation with only natural person shareholders who were also beneficiaries of the trust at the relevant time.

For the purposes of section 36A: 

  • Discretionary trust and beneficiary are defined in section 36A(3).
  • The discretionary trust from which property is being transferred to a beneficiary of that trust is called the principal trust.
  • The relevant time means the time at which the property first became subject to the principal trust.

Evidence:

The following information is required: 

  1. The Digital Duties Form.
  2. A complete copy of the stamped discretionary trust (the trust) deed and copies of all amending deeds.
  3. In relation to any trust deed for which a copy of the stamped deed cannot be produced: 
    • A statutory declaration declaring what steps have been taken to locate the lost original trust deed, which has been made by the person with knowledge of those steps. If an unstamped copy of the trust deed is available you are required to attach a copy and explain how it was obtained.
    • Copies of financial statements and income tax returns of the trust for the last three financial years showing that the property was an asset of the trust.
    • Any other material showing the property as an asset of the trust, for example:
      • A copy of the contract of sale for the purchase of the property by the trustee (showing capacity as trustee of the trust).
      • If the trustee is a corporation, minutes of a directors' meeting resolving to accept appointment as trustee of the trust and to acquire the property.
  4. A copy of the historical certificate of title.
  5. A copy of the duly stamped transfer to the trustee of the trust.
  6. Copies of the trust's financial statements for the last three financial years.
  7. If the property's title particulars have changed since the relevant time, provide copies of the parent titles and the plan of subdivision or consolidation showing how the current title particulars were derived from the parent title.
  8. A statutory declaration by the trustee of the trust, addressing the matters set out below: 
  • State whether the transferee is the beneficiary absolutely of the trust and that the beneficiary is a corporation of which all the shareholders are natural persons who were beneficiaries of the trust at the relevant time.

Capacity of trustee

  • State whether the trustee has held the property in any other capacity, either before or after the relevant time, explaining in what other capacity they acted.
  • Identify the provision of the trust deed under which the trustee has the power to distribute capital to the beneficiaries.

The relevant time

  • State the date the property first became subject to the trust.
  • Identify the provision of the trust deed under which the transferee corporation is a beneficiary at the relevant time.
  • If the transferee corporation is not named as a beneficiary in the trust deed:
    • Explain how the transferee is considered to be a beneficiary of the trust at the relevant time.
    • Identify the class of beneficiary that they fall into under the trust.
    • When they became a beneficiary of the trust.

The transferee is a corporation

Note: Section 36A(1)(d) cannot apply if any of the shareholders are corporations or any of the natural persons were not beneficiaries of the trust at the relevant time.

  • As the transferee is a corporation, please address the following: 
    • Provide a current ASIC search showing all current shareholders of the transferee corporation.
    • Identify the provision of the trust deed under which each of the shareholders was a beneficiary of the principal trust at the relevant time.
    • If any shareholder is not named as a beneficiary in the trust deed:
      • Explain the circumstances by which the shareholder became a beneficiary of the trust.
      • Identify the class of beneficiary that they fall into under the trust.
      • State when they became a beneficiary of the trust.

Consideration and mortgages

  • State whether the transfer is part of a sale or other arrangement under which there exists consideration for the transfer. 
  • State whether the transferee paid any amount to the transferor or to any other person in respect of the transfer. 
  • State whether the trust had borrowed funds from another person other than a financial institution (e.g. beneficiary loan accounts, loans from associates etc). State whether the transfer related to the forgiveness of any such loan. If yes, provide full details of the arrangement together with copies of loan statements before and after forgiveness of the loan.  
  • If loan accounts (as referred to in the previous point) exist and the loans are not to be forgiven as part of the transfer, state how the trust intends to pay out the loans.
  • State whether the property was encumbered by a mortgage, whether registered or unregistered, immediately before the transfer. If so provide evidence of the amount owing under that mortgage immediately before and after the transfer (e.g. account statement, letter from the financier).
  • State whether the mortgage liability was:
    • assumed by the transferee, or
    • paid out by the transferee with a new mortgage over the property that secures the same or greater amount as that outstanding under the mortgage that existed immediately before the transfer.
  • If the mortgage liability was assumed or paid out by the transferee then state the circumstances for the initial mortgage, including: 
    • When the mortgage was created, in particular whether it was at or before the time the property became subject to the trust. 
    • Whether the mortgage was part of a refinancing of an earlier mortgage.  If yes, provide details about when the earlier mortgage was created, 
    • Whether the mortgage was created to secure borrowings that have been applied to the improvement of the property. If yes, provide documentary evidence to support this.
    • Whether the mortgage was obtained in connection with matters unrelated to the property. If yes, please set out what these other matters are.
  • If the mortgage liability was not assumed or paid out in full by the transferee, explain how the mortgage liability was reduced or discharged and provide evidence of the source of funds (e.g. bank/financial statements).