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Trusts are legal arrangements where a person or company (the trustee) holds property and the legal title to that property for the benefit of someone else (the beneficiary or unit holder). The identity of the beneficiaries/unit holders and the extent of their interest depend on the wording of the trust document. There are many types of trusts, including discretionary trusts, fixed trusts, special disability trusts, unit trusts and superannuation funds.

Duty is payable under the Duties Act 2000 (the Act) on a dutiable transaction. Generally, a dutiable transaction occurs when you buy property, such as your home or an investment property, and you have to pay duty on that purchase. Duty is also payable when you acquire property or an interest in property in some way other than buying it, for example, through a lease, gift, declaration of trust or other transaction effecting a change in the beneficial ownership of property.

Duty treatment of trusts

Declarations of trust

A declaration of trust over land attracts duty at the same rate as a land transfer. 

A declaration of trust that does not declare a trust over land attracts duty of $200.

Please refer to our summary of current duty rates for more guidance.

Exemptions for trusts

There are exemptions from duty available for certain transactions involving trusts under Chapter 2, Part 5 of the Act. These transactions include:

  • Property vested in an apparent purchaser,
  • Transfers to and from a trustee or nominee,
  • Property passing to beneficiaries of fixed or discretionary trusts,
  • Property passing to unitholders in a unit trust scheme,
  • Property passing to beneficiaries of a superannuation fund

Broadly, it is important to remember that:

  1. The purpose of the various trust exemptions under the Act is to provide an exemption for the transfer from a specific type of trust to the beneficiaries of that trust.
  2. Each exemption section must be read as a whole.
  3. A transferor trust and a transferee must satisfy all the conditions of a relevant exemption for it to apply. The trust exemptions are not intended to apply regardless of the nature of the trust and the transaction.

Hybrid trusts

A hybrid trust is not defined in the Act. It is a mix of two or more different types of trusts. Where duty applies to a transaction involving a hybrid trust, determining the nature of the trust for duty exemption purposes can be difficult. Each hybrid trust deed is considered on its own merits, but generally:

  1. The terms of a hybrid trust deed as a whole determine its nature and whether it meets the specific requirements of any of the exemptions available for trusts under Chapter 2 of the Act.
  2. The nature of the trust is based on all clauses of the trust deed, not just the clauses triggered to effect a particular transaction. Where a trust is a hybrid trust, the fact that, for example, the trust transfers dutiable property to a discretionary beneficiary rather than a unitholder does not on its own change the fundamental nature of the trust from being a trust to which a unit trust scheme relates.
  3. The trust fund is likely to be a unit trust:
  • If the trustee holds the trust fund for the benefit of the beneficiaries and/or unit holders, and
  • It can distribute the income and/or capital of the trust to beneficiaries and/or unitholders.

Mirror or cloned trusts

A mirror trust is not defined in the Act either. It is commonly understood that a mirror trust refers to a new trust where the beneficiaries are the same as another trust (the original trust) and the terms of the both trusts have exactly the same meaning and effect.

Mirror trusts are also sometimes referred to as cloned trusts. The terms are used interchangeably.

A question may arise as to whether a transfer of dutiable property from an original trust to a new mirror trust is a dutiable transaction and is subject to duty. Dutiable transaction is defined in s7 of the Act to include, among other things, a transfer of dutiable property.

Irrespective of how the new trust is described or constituted, a transfer of dutiable property from an original trust to a new trust is a dutiable transaction unless a specific exemption applies to the particular facts of a matter. There is no exemption available in the Act specifically for mirror trusts and generally, the cloning does cause a change in beneficial ownership.