A change in the NSW Duties Act has made documentation regarding the proof of ownership of an SMSF property more important, a specialist legal firm has said.
The State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW) has changed the means by which duty will be applied to properties in the state where it is held for a person in a trust structure.
According to Townsends Business and Corporate Lawyers, duty based on the full value of a property “will be levied on the making of a statement that has the effect of acknowledging that property vested, or to be vested, in the person making the statement, is held, or is to be held, in trust for a person mentioned in the statement”.
This has adverse implications for SMSFs due to the standard practice to date of proving to a third party, such as a bank, the ATO or Family Court, the trustee is holding the real estate on trust for the superannuation fund.
“Previously when asked to assist with this issue we’ve suggested an acknowledgement of trust – a document which created no new legal or equitable rights but simply acknowledged an existing trust. This now seems to be dutiable in NSW, with the person making the statement liable to pay duty on the dutiable value of the property,” Townsends Business and Corporate Lawyers principal Peter Townsend said.
“It is not yet clear how these provisions will affect various legal documents in practice, however, given the various acknowledgements of existing trusts in many legal documents, it has the potential to be a minefield.”
Townsend suggested the best way currently to prove the registered proprietor of the land is holding that asset on trust for the SMSF is through keeping sound compliance documentation.
This includes resolutions of the fund trustee, resolutions of the fund members and bank statements proving all purchase money for the property was sourced from the SMSF.
“And, of course, keep all the records of the transaction like contracts, correspondence, legal files, duty payments, et cetera,” Townsend noted.