Changing a trustee is a routine step in the life of a trust. It may happen when a trustee retires, a corporate trustee is appointed or a restructure is carried out for asset protection. The key question is whether such a change will trigger stamp duty in New South Wales.
Under section 54 of the Duties Act 1997 (NSW) (Duties Act), a transfer of trust property to a new or continuing trustee may attract ad valorem transfer duty unless a concessional duty applies.
This guide explains when a change of trustee triggers transfer duty, how the concessional rate in section 54(3) of the Duties Act can apply, what the Chief Commissioner requires, and when full duty will instead be assessed.
For further information on how we can support you with stamp duty advice and structuring, visit our Stamp Duty page.
Does a change of trustee trigger transfer duty (stamp duty)?
Yes – a change of trustee may trigger stamp duty where the trust holds dutiable property such as New South Wales real estate. Normally, duty is assessed at ad valorem rates as if the property were being transferred outright.
However, section 54(3) of the Duties Act creates a concessional rate of duty that is available only if strict conditions are satisfied.
What are the conditions of the section 54(3) concession?
For the concessional rate of duty set out in section 54(3) of the Duties Act to apply, the Chief Commissioner must be satisfied that the below strict requirements are met.
No continuing trustee can be or become a beneficiary
If a trustee retires and there are continuing trustees, none of them can be or become beneficiaries under the trust. This applies even to remote or contingent beneficiary rights.
The trust deed should include an irrevocable clause that prohibits trustees from ever holding beneficial interests. Without this prohibition, the requirement is not met and full duty applies.
No new trustee can be or become a beneficiary
Similarly, a newly appointed trustee cannot be or become a beneficiary of the trust. This applies whether the trustee is a substitute or an additional trustee.
For example, appointing a company as trustee is acceptable provided the company itself cannot benefit under the trust deed. But if a beneficiary of the trust were appointed as trustee, this condition fails and the concession cannot apply.
The transfer must not form part of a duty avoidance scheme
The transfer must not be part of a scheme that confers an interest in the trust property on a trustee or another person, where that conferral causes another beneficiary (or potential beneficiary) to lose their interest.
“Scheme” is interpreted broadly and can include any plan, arrangement or series of steps. The Chief Commissioner may consider the surrounding circumstances and may require an explanation of why the trustee change occurred.
If the transfer is connected to a wider restructuring that shifts beneficial ownership or advantages some beneficiaries at the expense of others, the concession will not apply.
What documents does Revenue NSW require
When applying for concessional duty under section 54(3) of the Duties Act, Revenue NSW will require supporting evidence to confirm the conditions are satisfied. Typical documents include:
- the original trust deed and any valid variations;
- the deed of retirement and appointment of trustees;
- a statutory declaration confirming that no continuing or new trustee is or can become a beneficiary;
- explanations of the reasons for the trustee change and surrounding circumstances; and
- evidence that the property is already an asset of the trust (for example, land tax records or prior title searches).
Without this documentation, the Chief Commissioner may refuse to apply the concessional rate and assess full duty instead.
Example of concessional duty applying
A discretionary family trust owns a residential property in Sydney valued at two million dollars. The trustee retires and a new corporate trustee is appointed.
The trust deed contains an irrevocable clause prohibiting trustees from being or becoming beneficiaries. No beneficial ownership changes as part of the transaction.
Because all section 54(3) of the Duties Act conditions are satisfied, the Chief Commissioner applies concessional duty rather than full ad valorem duty.
When does full transfer duty apply?
If the conditions in section 54(3) of the Duties Act are not satisfied, the concessional rate does not apply and the transfer will be assessed at full ad valorem duty. This means duty is charged on the market value of the property as if it had been transferred outright.
Common situations where full duty applies include:
- the trust deed does not irrevocably prohibit trustees from being or becoming beneficiaries;
- a new or continuing trustee is also a beneficiary of the trust;
- the transfer forms part of a broader arrangement or scheme that alters beneficial interests in the property;
- the property being transferred is not already an asset of the trust at the time of the change
In these circumstances, Revenue NSW requires evidence of value and will assess duty on the dutiable value of the property.
Example of full duty applying
A family trust owns commercial property in New South Wales worth three million dollars. The trustee retires and one of the beneficiaries is appointed as the new trustee.
The trust deed does not prohibit trustees from being beneficiaries.
Because section 54(3) of the Duties Act is not satisfied, Revenue NSW assesses duty on the full value of the property.
For further information on how we can support you with stamp duty advice and structuring, visit our Stamp Duty page.