Trusts and property acquisitions by trusts are dealt with differently by the State Revenue Office (SRO), both when assessing stamp duty and when calculating land tax.
Stamp duty on property acquisition – exemptions and penalties
Purchasers of property in Victoria are required to pay stamp duty on their acquisitions, unless they are exempt. Exemptions from duty available for certain transactions involving trusts 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.
Whether exempt or not, a trustee who acquires property must notify SRO within one month of acquiring the property that they have done so in their capacity as trustee, by providing a Notice of Trust Acquisition. Failure to lodge a notice in time may result in penalties.
Trustees who fail to notify may be liable for interest and penalty tax from 25% to 75% of the additional amount of tax assessable had the notification been made in time. From 1 July 2018 to 30 June 2019, the rate of interest is 9.96 %, which is the premium rate of 8% added to the market rate of 1.96 % per annum.
Land tax – trust surcharge rate
Trusts holding property in Victoria with a taxable value over $20,000.00 are subject to a surcharge rate of land tax. The surcharge is calculated on a sliding scale depending on the taxable value of the land. As an example, land valued between $20,000 and $1.62 million has approximately 0.375% additional duty. The surcharge rate does not apply to trusts with landholdings having taxable value above $2.7 million.
Prior to 2006, a trust was not required to notify SRO of a trust acquisition, but trusts already holding property are now required to be noted. If you hold property as trustee of a trust, and the trust is not noted on the Land Tax Assessment Notice, you should immediately seek legal advice as you may be subject to retrospective land tax at the higher rate and penalties for non-payment.
Land tax – absentee owner surcharge
From 1st January 2016, an absentee owner surcharge on land tax is applicable for Victorian land owned by an absentee owner, including absentee trusts. An absentee trust is a trust with at least one beneficiary who is an absentee individual, namely:
- is not an Australian citizen or permanent resident;
- does not ordinarily reside in Australia;
- was absent from Australia on 31 December; or
- was absent from Australia for more than six months in total during the prior calendar year.
From 1st January 2017, the surcharge has increased from 0.5% to 1.5%.
Certain trusts are exempt, such as charitable trusts or complying superannuation trusts, or where a beneficiary of a discretionary or unit trust is occupying the property as their principal place of residence.
It is possible apply for an exemption from paying absentee owner surcharge for trusts which conduct a commercial operation in Australia and whose commercial activities contribute to the Victorian economy.
Stamp duty on Trust Deed
When establishing a trust, whether the trustee subsequently acquires property or not, it is mandatory to lodge the trust deed with SRO. Except for superannuation trust deeds, an establishment fee, currently $200.00, is also payable within 30 days of signing of the deed. This is done electronically through Duties Online. SRO no longer accepts over the counter stamping requests.
Some older Trust Deeds were declared to SRO but did not receive a stamp duty notation or Certificate of Duty. In these cases, trustees may be required to prove to SRO that the trust deed has been properly declared and stamp duty paid, or penalties may apply.