Beware of ‘corporate trustee duty’ in WA & Qld

Most businesses would be aware that stamp duty can apply when either assets or a business are transferred (often referred to as ‘transfer duty’) or when there is an acquisition of shares in a landholding corporation or units in a landholding unit trust (often referred to as ‘landholder duty’). 

However, taxpayers commonly overlook that another type of duty, ‘corporate trustee duty’ can apply in Western Australia (WA) and Queensland when there is a change in the shareholding of a corporate trustee of a discretionary / family trust. This Tax Insight explores when corporate trustee duty can apply and what the implications may be.

What is ‘corporate trustee duty’?

‘Corporate trustee duty’ can apply where there is a change in the shareholding of a corporate trustee of a discretionary/family trust that holds dutiable property located in either WA or Queensland on trust. This is despite and separate to the exemption from landholder duty applicable to the acquisition of shares in a landholding corporation.  

Transfer duty exemption for transfer of primary production land

Many WA and Queensland farmers are familiar with, and routinely apply, the ‘family farm’ / intergenerational primary production exemption from transfer duty, provided for by the WA and Queensland Duties Acts. This exemption applies to exempt from transfer duty all transfers of farming land and certain related assets between family members where the land is used solely or dominantly in primary production.

WA landholder duty exemption for a landholder with primary production land holdings

Relevantly, section 171 of the WA Duties Act replicates the foregoing exemption to transfers of shares between family members in a landholding corporation that uses the underlying land solely or dominantly in primary production.

Spectre of ‘corporate trustee duty’

Lesser known are the ‘corporate trustee duty’ provisions contained in the WA and Queensland Duties Acts which provide for the application of ‘corporate trustee duty’ where there is a disposition of a share in a corporate trustee of a discretionary/family trust that is a landholding corporation.

Specifically in a WA context, subsection 67(1) of the WA Duties Act provides as follows^[1]:

‘A disposition of a share in a corporate trustee is taken to be an agreement for the transfer of dutiable property and is liable to duty accordingly if it is a transaction, or part of a transaction, that is a scheme or arrangement, or part of a scheme or arrangement, that results, or will or may result, in a change in any beneficial interest, whether vested or contingent, in dutiable property held directly or indirectly by the corporate trustee of a discretionary trust’.

Where subsection 67(1) is enlivened, the ‘dutiable value’ of the land will be equivalent to the proportion of the total issued capital of the corporate trustee represented by the share^[2], and all shareholders in the corporate trustee will be liable to the landholder duty imposed^[3].

Similar ‘corporate trustee duty’ provisions that apply to corporate trustees holding (on trust) property located in Queensland can be found in Part 2 of Chapter 3 of the Queensland Duties Act.

Implications

Parties must be aware of the ‘corporate trustee duty’ provisions where land in WA or Queensland, including primary production land, is held on trust by a corporate trustee.

Outside of WA and Queensland, ‘corporate trustee duty’ should not apply. For example, in New South Wales, subsection 147(3) of the Duties Act 1997 (NSW) provides that ‘an interest in land is not a land holding of a company if the company holds the land on trust, but only if the company is not a beneficiary of the trust’.

FOR MORE INFORMATION

If you have concerns regarding or would like to discuss the potential application of ‘corporate trustee duty’, please contact Mira Brewster, Sam Mohammad or your local RSM advisor.

 [1] Subsection 67(2) of the Duties Act provides that subsection 67(1) will not apply where the transferor of the share is the personal representative of a deceased person, and the transferee is a beneficiary in the administration of the estate of the deceased.

[2] Duties Act, section 68.

[3] Duties Act, section 69.