Property passing to beneficiaries of fixed trusts

Circumstances/Transactions:

Transfer to a beneficiary of the fixed trust (the principal trust) as trustee of another trust (the second trust) which has beneficiaries all of which are corporate trustees of a further trust (the third trust) of which all the beneficiaries are natural persons of that third trust at the relevant time. For the purpose of s36: 

• A fixed trust is defined as any trust other than:
  • A discretionary trust under s36A.
  • A trust to which a unit trust scheme relates.
  • A superannuation fund under s41A.
• The relevant time means the time at which the property first became subject of the principal trust. 

Evidence:

The following information is required:  

1. The Digital Duties Form.
2. A copy of the stamped trust deed of the principal trust, together with copies of all amending deeds.
3. A copy of the stamped second trust together with copies of all amending deeds.
4. A copy of the stamped third trust together with copies of all amending deeds. 
5. In relation to any trust deed for which a copy of the stamped deed cannot be produced:
   • A statutory declaration declaring what steps have been taken to locate the original trust deed, made by a person having knowledge of those steps. If an unstamped copy of the trust deed is available, explain how it was obtained.
   • Copies of financial statements and income tax returns of the principal trust for the last three financial years showing the property was an asset of the trust.
   • Any other material showing the property as an asset of the principal trust, for example:
     • A copy of the contract of sale for the purchase of the property by the trustee (showing capacity as trustee of the trust).
     • If the trustee is a corporation, minutes of a directors' meeting resolving that the trust accept appointment as trustee of the trust and acquire the property for the trust.
6. A copy of the historical certificate of title.
7. Copies of financial statements of the principal trust for the last three financial years.
8. If the property's title particulars have changed since the relevant time provide copies of the parent titles and the plan of subdivision or consolidation showing how the current title particulars were derived from the parent title.
9. Evidence of the value of all the properties under the principal trust as at the date of the transfer, by one of the following:
   • A letter of appraisal from a licensed real estate agent and a copy of the relevant rates notice.
   • A valuation by a certified practising valuer who is a member of the API or by a member of the Real Estate Institute of Victoria with sworn valuer accreditation.
   • In circumstances where a letter of appraisal or sworn valuation could not be obtained, an explanation of the steps taken to obtain either the appraisal or valuation.
10. A statutory declaration by the trustee of the principal trust, addressing the matters set out below:
    • State whether the transfer is to the beneficiary of the principal trust as trustee of a second trust which has beneficiaries all of which are corporate trustees of a third trust of which all the beneficiaries are natural persons.

Capacity of trustee

• State whether the trustee has held the property in any other capacity, either before or after the relevant time, and if so explain in what other capacity they acted.
• Identify the provision of the principal trust deed under which the trustee has the power to distribute capital to the transferee.
• State whether any prior distributions of property have been made to beneficiaries of the principal trust and if so identify the assets transferred and to whom.

The relevant time

• State the date the property first became subject to the principal trust.
• Identify the provision under the trust deed of the principal trust under which the transferee was a beneficiary at the relevant time.
• If the transferee is not named as a beneficiary in the principal trust deed explain how the transferee is considered to be a beneficiary of the principal trust at the relevant time.

Beneficiaries' entitlements

• State the value of the beneficiary's entitlement under the principal trust at the date of transfer.
• State the value of each asset at the date of transfer.
• Identify and state the value of all liabilities of the principal trust at the date of transfer.

The second trust

• If any of the beneficiaries of the second trust are not named in the second trust deed:
  • Explain how they are considered to be a beneficiary of the second trust at the relevant time. 
  • Identify the class of beneficiary under the second trust that they fall into.
  • When they became a beneficiary of the second trust.

The third trust

• Identify the provision under which the beneficiaries of the third trust were beneficiaries of the third trust at the relevant time.
• If any of the beneficiaries of the third trust are not named as a beneficiary of the third trust:
  • explain how they are considered to be a beneficiary of the third trust at the relevant time,and
  • identify the class of beneficiary under the third trust that they fall into, and
  • when they became a beneficiary of the third trust,

Consideration and mortgages

• State whether the transfer is part of a sale or other arrangement under which there exists consideration for the transfer,
• State whether the transferee paid any amount to the transferor or to any other person in respect of the transfer. 
• State whether a trust had borrowed funds from another person other than a financial institution (e.g. beneficiary loan accounts, loans from associates etc). State whether the transfer related to the forgiveness of any such loan. If yes, provide full details of the arrangement together with copies of loan statements before and after forgiveness of the loan.  
• If loan accounts (as referred to in the previous point) exist and the loans are not to be forgiven as part of the transfer, state how the trust intends to pay out the loans.
• State whether the property was encumbered by a mortgage, whether registered or unregistered, immediately before the transfer. If so, provide evidence of the amount owing under that mortgage immediately before and the transfer (e.g. account statement or letter from the financier).
• State whether the mortgage liability was: 
  • assumed by the transferee, or
  • paid out by the transferee with a new mortgage over the property that secures the same or greater amount as that outstanding under the mortgage that existed immediately before the transfer. 
• If the mortgage liability was assumed or paid out in full by the transferee, explain the circumstances for the initial mortgage, including: 
  • When was the mortgage created, in particular was it at or before the time the property became subject to the trust. 
  • Whether the mortgage was part of a refinancing of an earlier mortgage. If yes, provide details about when the earlier mortgage was created. 
  • Whether the mortgage was created to secure borrowings that have been applied to the improvement of the property. If yes, provide documentary evidence to support this. 
  • Whether the mortgage was obtained in connection with matters unrelated to the property. If yes, please set out what these other matters are. 
• If the mortgage liability was not assumed or paid out in full by the transferee, explain how the mortgage liability was reduced or discharged and provide evidence of the source of the funds (e.g. bank/financial statements).