A transfer of dutiable property is subject to duty under the Duties Act 2000 (the Duties Act) unless an exemption applies. Where dutiable property is transferred in accordance with the terms of a will or codicil it may be exempt from duty under section 42 of the Duties Act.
In order for s42 to apply, the transfer must be in accordance with the terms of the will or codicil or be made by the legal personal representative of a deceased person (the executor) to a beneficiary of the deceased's estate and not be made for valuable consideration.
Ruling DA-051 - Transfer of dutiable property from a deceased estate explains how the exemption under s42 applies.
Property transferred under a will or codicil
Where the transfer of dutiable property is made under, and conforms strictly with, the trusts contained in the will of the deceased person, it can be processed using Duties Online (DOL) and assessed as exempt under s42(1).
Kate’s will bequeaths her home (valued at $300,000) to Stephen, Andrew and Rachel in equal shares. The executor arranges for the transfer of the property to Stephen, Andrew and Rachel in equal shares. This transfer is strictly in accordance with the will and must be processed using Duties Online (DOL).
Property transfers to be lodged with us (non Duties Online)
All other transfers of dutiable property arising from a deceased estate must be lodged with us, but you cannot use Duties Online to process these particular transactions. Instead, you can use our Electronic Lodgement Model (ELM) to electronically submit the transaction. We will consider whether duty is payable or whether the transfer is exempt and notify you accordingly.
Transfers which must be lodged with us via our ELM include:
- A transfer arising on an intestacy.
- A transfer of dutiable property not made for valuable consideration by the executor to a beneficiary in satisfaction of the beneficiary’s entitlement under the will or arising on an intestacy.
- A transfer that has taken place under Part IV of the Administration and Probate Act 1958.
- A transfer of a life estate and/or right to reside.
- A transfer under a testamentary trust.
There are different lodging requirements, depending on the exemption you are seeking. Our Evidentiary Requirements Manual explains what documents you need to lodge.
Life estates and estates in remainder
Life estates and estates in remainder are dutiable property under the Duties Act. Accordingly, the creation or transfer of a life estate or estate in remainder is subject to duty under the Duties Act unless an exemption applies.
A life estate is one type of freehold estate. It arises by grant or operation of law for the benefit of a person for the rest of his or her life. The key difference between an estate in fee simple and a life estate is that the life estate exists for the duration of the person's life whereas a freehold estate is not limited in duration.
A life estate can be created by a transfer of land instrument, a declaration of trust or under a will. In any case, there must be clear words showing an intention to create a life estate, such as 'to A for life' rather than simply a 'right to reside'. Our ruling DA-028 - Duty liability of a right to reside, life tenancy or life interest provides more information on how to distinguish between a right to reside and a life estate for the purposes of s42 of the Duties Act.
Where the creation or transfer of a life estate or estate in remainder is not exempt, its dutiable value needs to be determined. We currently use a money table for life estate, prepared by the South Australian Revenue Office, to determine the value of the life estate or estate in remainder. We then use this to calculate duty.
If you want to provide your own actuarial valuation, you are entitled to do so.
A testamentary trust is a trust which is specified in the will of the deceased and arises upon their death.
The deceased intends that a trustee(s) holds the property in accordance with the terms of the testamentary trust for specified beneficiaries. At some future time, the trustee will distribute the property to those beneficiaries.
Where a deceased person leaves dutiable property to the trustee(s) of a testamentary trust, there can be two transfers of property:
- From the deceased estate, that is from the executor of the will to the trustee of the testamentary trust (the first transfer).
- From the trust at a future date, that is from the trustee of the testamentary trust to the beneficiaries of that trust (the second transfer).
We will treat the first transfer as if it were a transfer to a beneficiary under the will of the deceased as long as the transfer conforms to the trust(s) contained in the will and is not made for valuable consideration. As such, it will be exempt from duty under s42 of the Duties Act.
The exemption in s42 does not apply to the second transfer given the trustee is no longer the executor. The transfer may, however, be exempt from duty under other exemptions in the Duties Act (e.g. s36 or s36A). This will depend on the type of testamentary trust and the circumstances of the transaction.
Where the will provides for the executor and the trustee of a testamentary trust to be the same person, the executor becomes the trustee of the testamentary trust when administration of the estate is complete. This triggers a dutiable transaction which will be exempt if it satisfies s42 of the Duties Act.