Duty on Acknowledgments of Trust – Law Reform in the NSW Duties Regime

Section 8AA of the Duties Act 1997 (the Act) was introduced on 19 May 2022 and renders liable to duty “acknowledgments of trust.”

Duty will be charged on the making of a statement that:

• purports to be a declaration of trust over dutiable property, but
• merely has the effect of acknowledging that identified property vested, or to be vested, in the person making the statement is already held, or to be held, in trust for a person or purpose mentioned in the statement.

A statement that has the above characteristics will give rise to ad valorem stamp duty at rates up to 5.5% (general rates) on the value of the NSW dutiable property the subject of the statement.

These changes followed the NSW Court of Appeal’s decision in Chief Commissioner of State Revenue v Benidorm Pty Ltd [2020] NSWCA 285 (Benidorm). In Benidorm, it was held that a document that merely acknowledged an existing position (i.e. an existing trust) could not amount to a declaration of trust and therefore no duty was chargeable.

The 19 May 2022 amendments created to deal with Benidorm and now contained in Revenue Ruling DUT031V2 reversed the effect of this decision and made clear that, at least in the context of declarations of trust, stamp duty remains an instruments tax.

When confirming existing trust arrangements there may be consequences if you identify the property and the person or persons for whom or the purpose or purposes for which it is held. Words merely referring to an existing trust or an existing trust deed will not amount to a declaration of trust or acknowledgment of trust.

Revenue NSW has helpfully noted that a declaration or statement that does not identify a dutiable property and the person or persons for whom, or the purpose or purposes for which, the property is to be held will not constitute a declaration of trust or an acknowledgment of trust for duties purposes. Further, words in a contract that are merely descriptive of the purchaser’s capacity as trustee of an existing named trust would not amount to a declaration of trust or an acknowledgment of trust for duties purposes.

How can we help you?

It is important that you obtain legal advice when executing documents that acknowledge an existing state of affairs and could be construed as constituting a declaration of trust. The execution of such a document could trigger duty on an arrangement on which stamp duty has already been paid (i.e. double stamp duty).

If you are concerned by the May 2022 changes or would like to understand more about how these changes may impact arrangements or transactions entered into on or after 19 May 2022, please do not hesitate to contact us on (02) 9964 0499 for advice.

If you have questions, contact our team today.