By Mira Brewster -
Snapshot
- A recent NCAT decision was the first to apply the ‘change in beneficial ownership’ provisions under sections 8(1)(b)(ix) and 8(3) of the Duties Act 1997 (NSW).
- The case highlights the importance of exercising caution in amending or varying a discretionary trust deed where the trust holds dutiable property in NSW, as where a ‘change in beneficial ownership’ results, ad valorem transfer duty is imposed.
- The decision demonstrates NCAT’s willingness to adopt a ‘substance over form’ approach in its assessment and review of a deed of variation. This will provide relief to taxpayers in the event of any drafting errors.
On 31 May 2024, Senior Member E.A. MacIntyre of the New South Wales Civil and Administrative Tribunal (‘NCAT’) decided the case of Baxter v Chief Commissioner of State Revenue [2024] NSWCATAD 153 (‘Baxter’). This represented the first ever decision on the application of the ‘change in beneficial ownership’ provisions constituted by sections 8(1)(b)(ix) and 8(3) of the Duties Act 1997 (NSW) (‘Duties Act’), which were introduced in early 2022.
Facts
The facts of material relevance to the decision in Baxter were:
Windsmere Family Trust
- In January 2021, the Windsmere Family Trust (‘Trust’) was established by Parkdaill Pty Ltd (‘Trustee’) pursuant to a deed entitled ‘Discretionary Trust Deed’ (‘Trust Deed’);
- The Trust Deed afforded the Trustee absolute discretion as to the distribution of the Trust’s income and capital to both ‘named beneficiaries’ and ‘eligible beneficiaries’. A failure to exercise the discretion by 30 June in relation to income for that financial year, or a default of exercise of such discretion, would enliven clauses requiring the distribution of that financial year’s income in a prescribed manner; and
- Later in 2021, the Trustee in its capacity as trustee of the Trust acquired two properties situated in Surry Hills, Sydney – the Norton Street property and the Ridge Street property.
