Property passing to a unitholder as the trustee of a discretionary trust

Circumstances/Transactions:

Transfer from a unit trust scheme to a unitholder:

• As trustee of a discretionary trust.
• All the beneficiaries of the discretionary trust are either:
  • Natural persons who were beneficiaries of that discretionary trust at the relevant time or became beneficiaries after the relevant time by permitted reason.
  • A corporation whose shareholders are all natural persons who were shareholders at the relevant time,

The beneficiaries of the discretionary trust cannot hold their interests in the discretionary trust as trustee of another trust.

Evidence:

The following information is required: 

1. The Digital Duties Form.
2. A copy of the stamped principal unit trust scheme (the principal scheme) deed, together with any amending deed.
3. A copy of the stamped discretionary trust deed, together with any amending deed.
4. In relation to any trust deed for which a copy of the stamped original deed cannot been 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 the financial statements and income tax returns of the principal scheme for the last three financial years showing whether the property was dealt with as an asset of the trust.
   • Any other material showing the property as an asset of the principal scheme, for example:
     • A copy of the contract of sale for the purchase of the property by the trustee (showing capacity as trustee of the principal scheme).
     • If the trustee is a corporation, minutes of a directors' meeting resolving to accept appointment as trustee of the principal scheme and to acquire the property.
5. A copy of the historical certificate of title.
6. Copies of financial statements of the principal scheme for the last three financial years. 
7. 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.
8. Evidence of the value of all the properties under the principal scheme immediately prior to 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 REIV with sworn valuer accreditation.
9. A complete copy of the unit register for the principal scheme, showing all changes in unitholding from the relevant time to immediately after the transfer.
10. A statutory declaration by the trustee of the principal scheme addressing the matters set out below:
    • State the capacity of the person making the declaration.
    • State whether the transferee is a unitholder of the principal unit trust deed and whether that unitholder is holding their interest in the principal unit trust deed as trustee of a discretionary trust. Specify the name of the discretionary trust.

The relevant time

• State the date the property first became subject to the principal scheme.

Capacity of trustee of the principal scheme

• State whether the trustee has held the property other than as trustee of the principal scheme; either before or after the relevant time, and if so explain in what other capacity they acted. 
• Identify the provision of the principal scheme deed under which the trustee has power to distribute capital to the unitholders. 

Unitholders' entitlements

• List all the assets and liabilities of the principal scheme at the date of transfer.
• State the value of each transferee's entitlement under the principal scheme immediately before the transfer.
• State the total value of all the assets of the principal scheme immediately before the transfer.
• State the unitholders proportion of the assets of the principal scheme that this transfer represents.
• State the unitholders proportion of the assets of the principal scheme at the relevant time.
• Explain how the transfer to the transferee has reduced the value of the unitholder's unitholding in the principal scheme either by reference to the number of units held or the value of such units.
• State whether any prior distributions of property have been made to unitholders of the principal scheme, and if so identify the assets transferred and to whom.

Beneficiaries under the discretionary trust (the 2nd trust)

• State whether all the beneficiaries of the discretionary trust are:
  • Natural persons who were beneficiaries of the discretionary trust at the relevant time.
  • Natural persons who became beneficiaries after the relevant time.
  • A corporate beneficiary, whose shareholders are all natural persons who were shareholders of the corporation at the relevant time.
• Identify the provision under which the beneficiaries of the discretionary trust are named.
• If any beneficiary of the discretionary trust is not named in the discretionary trust deed:
  • Explain how the beneficiary is considered to be a beneficiary of the discretionary trust.
  • Identify the class of beneficiary that they fall into under the trust.
  • When they became a beneficiary of the discretionary trust.
  • If a beneficiary is a corporation, provide a historical ASIC search of the corporate beneficiary of the discretionary trust at the relevant time.
• State whether the beneficiaries of the discretionary trust are holding their interest in the discretionary trust as trustee of another trust.
• If the trustee of the principal scheme does not have sufficient knowledge as to the capacity in which the beneficiaries of the discretionary trust are holding their interest in the discretionary trust, further statutory declarations will be required from each of the beneficiary of the discretionary trust declaring the capacity in which they hold their interest in the discretionary trust, and whether they hold their interest in the discretionary trust as trustee of another trust.

Consideration and mortgage

• 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 the scheme has borrowed funds from another person other than a financial institution (e.g. unit holder 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 scheme 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 after the transfer (e.g. account statement, letter from the financier).
• State whether the mortgage liability was either:
  • Assumed by the transferee.
  • 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 by the transferee then state the circumstances for the initial mortgage, including: 
  • When the mortgage was 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 funds (e.g. bank/financial statements).  ​