Issue 4 of our State Taxation Series looks at section 36A of the Duties Act 2000 (Vic) (“the Act”).
The transfer of property from trustee to beneficiary is exempt from duty, with various exemptions from duty available under Chapter 2 of the Act.
Section 36A governs the exemption from duty when a transfer of dutiable property subject to a discretionary trust takes place.
To satisfy the requirements in section 36A, the following must be met:
- The duty (if any) charged in respect of the dutiable transaction that resulted in the property becoming subject to the principal trust has been paid or will be paid;
- The beneficiary was either:
- A beneficiary at the relevant time; or
- Became a beneficiary after the relevant time by reason of becoming a spouse or domestic partner, or becoming/being an adopted child, step child, or lineal descendant of a beneficiary.
- The transfer of dutiable property is to the beneficiary absolutely or to the beneficiary as trustee of another trust of which all the beneficiaries are relevant beneficiaries.
- The Commissioner is satisfied that the transfer is not part of a sale or other arrangement under which there exists any consideration for the transfer.
It is a relatively easy exercise ascertaining whether Items 1 – 3 have been satisfied as they involve fairly general factual enquiries.
On the other hand, Item 4 dealing with “consideration” is not as straight-forward, and can rightfully be characterised as a legal enquiry.
In law, consideration is extremely broad, and is anything that is troublesome to oneself, not necessarily having to be a cost incurred or a monetary sum exchanged.
The recent decision in Astakhov v Commissioner of State Revenue  VCAT 1363 highlights that consideration under the Act is technical and complex.
The decision reflects a common factual scenario where discretionary trusts are in place, that being an in specie distribution of property to beneficiaries.
Astakhov is instructive because it confirms that the forgiveness of a debt can constitute consideration in the context of section 36A of the Act. The decision also makes it clear that forgiveness of a debt (eg. loan) does not need to be an express act, but can be implied by conduct.
The decision also serves as authority and a reminder of the complexities surrounding the harmonisation of trust accounts with the actual (or perceived) legal position, particularly so in the context of consideration in the stamp duty context.
Our State Taxation Team at Pointon Partners regularly provides advice on stamp duty matters and have also successfully assisted numerous clients with stamp duty disputes and reviews, as well as litigation involving the State Revenue Office.