In South Australia stamp duty is not payable on a transfer of real property from a trustee of a trust to a person who already has a defined beneficial interest in the property. For example, a transfer of property from the trustee of a unit trust to the unit holder. We call this the ‘Beneficiary Exemption‘ (Section 71(5)(e) of the Stamp Duties Act 1923 (SA)).
However, the Beneficiary Exemption does not apply if the beneficiary is another trust, i.e. a transfer from one trustee to another trustee (Section 71(6) of the Act). So for example, if the person holding the units in the unit trust was the trustee of a discretionary trust, then a transfer of property from the unit trust to the discretionary trust would not be exempt.
Furthermore, the Beneficiary Exemption only applies where the beneficial interest arose under an instrument that was duly stamped. This generally excludes the exemption from applying to a distribution of property from a discretionary trust to a beneficiary of the discretionary trust, because the beneficiary of a discretionary trust only has a ‘potential’ beneficial interest subject to the trustee exercising their discretion to make them entitled.
Thankfully, Revenue SA has long treated the Beneficiary Exemption as applying to a distribution of property from a self-managed superannuation fund to a member of the SMSF. The exemption applies up to the value of the member’s account balance. If the property is worth more than the member’s account balance, then stamp duty is potentially payable on the difference.
However, there has been some uncertainty whether section 71(5)(e) also applies after the death of a SMSF member. That is, when property is transferred in specie to a dependant of the member, or to the member’ s estate (i.e. to their legal personal representative). In the case of a distribution to the member’s estate, the property would then form part of the member’s estate to be dealt with under the terms of their Will.
The uncertainty arose because, strictly, the dependant or LPR did not have a beneficial interest in the property under an instrument that was ‘duly stamped’, because only the member themselves had such an interest that arose when the property was acquired by the super fund under the stamped memorandum of transfer. Furthermore, the LPR arguably receives the property ‘on trust’ for the beneficiaries of the member’s estate.
We understand that Revenue SA accepts that section 71(5)(e) extends to distributions made to a dependant or LPR of a deceased super fund member. So no stamp duty will apply on the transfer of property from the fund up to the value of the deceased’s member balance. Stamp duty is only payable on any excess value transferred to the dependant or LPR.
We note that:
- This analysis is only relevant to property that would otherwise incur duty. With the abolition of duty on commercial property from 1 July 2018, this is likely to be less relevant to property held within a SMSF; and
- Stamp duty will still apply on the amount, if any, by which the value of the property exceeds the deceased’s members super account balance.
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The information contained in this post is current at the date of editing – 28 March 2023
