Most advisors are aware of the exemption from transfer duty that is available in Queensland when a trustee of a discretionary trust, unit trust or super fund is replaced. However, there is a hidden trap where duty is still payable that can cause significant problems with client relationships if it is not identified first.
The trap arises where the trustee of the trust owns motor vehicles. If it is intended to transfer the registered ownership of the vehicles to the new trustee, vehicle registration duty must be paid based on the market value of each vehicle. Unlike the situation with transfer duty, there is no exemption from vehicle registration duty for a change of trustee transaction.
There are exemptions from vehicle registration duty for primary producers (but only for a gross vehicle mass over 6 tonnes), and for ‘heavy vehicles’ governed by the Heavy Vehicle National Law 2012. There are also exemptions relating to disabled persons and for gifts between family members.
Comparatively speaking, the cost of vehicle registration duty is relatively minor. However, where the possibility of such duty being payable is not first raised with clients they can, in a worst case, seek to recover the costs from advisors.
We recently were asked to prepare a Deed of Appointment and Retirement of Trustee for a family trust where the clients wanted to de-register the existing corporate trustee (it was over 25 years old and had undertaken a number of roles) and replace it with a new, clean company. We discovered that the trust held a Maserati, an Aston Martin and a motorhome (along with other investment assets). The OSR calculator estimated duty of $31,200 would be payable to transfer registration of the 3 vehicles to the new trustee company!
We were able to specially draft the Deed so that the existing corporate trustee agreed to continue to hold the legal title to the 3 vehicles as agent for the new trustee, and thus avoid the potential duty. However, it meant that the existing corporate trustee could not be de-registered at this time.
If the change of trustee had occurred and the client then submitted a Transfer of Vehicle Registration Application form to Queensland Transport, then the duty would have been payable.
We expect this will be a rare issue with most of your clients. However, in the few cases where it is relevant it has the potential to cause damage to valuable relationships where it is not identified and raised.