New rules impacting Victorian LRBA holders
Victorian SMSF trustees must lodge declarations of trust relating to LRBAs with the State Revenue Office (SRO) for duty assessment under recently introduced rules, according to Smarter SMSF.
In a recent blog post, Smarter SMSF chief executive and co-founder Aaron Dunn said the incoming changes were important for SMSF trustees to note, regardless of whether or not the declaration of trust would attract a duty under the Duties Act (Vic) 2000.
“It is important to note that from 26 November 2018, all declarations of trust over dutiable property, including declarations made by the trustee of a custodian trust — bare trust or holding trust — that holds land on trust for a regulated super fund under an LRBA needs to be lodged with the SRO and stamped,” Mr Dunn said.
“The duty treatment will be exempt, or non-dutiable, in circumstances where section 34(1)(a)(i) of the Duties Act applies.”
As property purchased in an SMSF was usually done by the custodian of a trust, this purchase would be a dutiable transaction in Victoria, as would the subsequent declaration by the custodian that they were holding the property in trust for the SMSF.
However, trustees could then rely on section 34(1)(a)(i) of the Duties Act to exempt the declaration of trust from duty if they could prove the custodian of the bare or holding trust being used was holding the property on behalf of their SMSF.
“In order for section 34(1)(a)(i) of the act to apply, it must be shown that all monies for the purchase of a particular property have been provided by the ‘real purchaser’, as this provides confirmation of the resulting trust relationship between the parties,” Mr Dunn said.
“Here, the specific wording of the bare trust deed is going to be relevant in the SRO making a final determination.”
Trustees could also apply for an exemption from duty under section 17 of the act if the transfer of the property to the custodian and declaration of trust occurred at the same time.
When the LRBA was repaid and the property transferred to the SMSF, trustees would be exempt from duty for this transaction under section 34(1)(b) of the act if they had been exempt previously under section 34(1)(a)(i), Mr Dunn said.
“Alternatively, section 36 of the act may apply to exempt a subsequent transfer of the property from the custodian to the SMSF if evidence is produced which establishes that duty was paid when the property was acquired by the custodian, and for the whole period of time the trust was declared by the custodian to the time when the property was transferred to the trustee of the fund, the trustee of the fund was the only beneficiary or the beneficiaries of the fund were always the only beneficiaries of the SMSF,” he said.
