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Asset Protection and TrustsPrint This Post

This whitepaper titled “Asset Protection and Trusts” was presented in Sydney for UNSW. As an estate planning lawyer in Sydney, I am very interested in asset protection and the use of trusts for that purpose. Asset protection also has a strong connection with bankruptcy.

Using Trusts for Business Operations:

What are the risks?

The trust should be set up correctly i.e. trust deed signed, dated, stamped and the settlor’s contribution must be paid into an account on the date of signing. Licences for intellectual property must be held by a non-trading entity. Whilst it is okay for a separate company to employ casual and part time staff, purchasers tend not to like complications regarding full time employees. You also have to comply with the discussion in GSTR 2002/5 regarding the sale of a going concern (at paragraph [122]).

The trust should be set up correctly i.e. trust deed signed, dated, stamped and the settlor’s contribution must be paid into an account on the date of signing. Licences for intellectual property must be held by a non-trading entity. Whilst it is okay for a separate company to employ casual and part time staff, purchasers tend not to like complications regarding full time employees. You also have to comply with the discussion in GSTR 2002/5 regarding the sale of a going concern (at paragraph [122]).

Family Trusts for Asset Protection

A look at Discretionary Trusts

The power of appointment

Case law (Re Burton; Wily v Burton [1994] ALR 557 per Davis J at 560) has made it clear that the power of appointment of a trustee is not property of the bankrupt which passes to the trustee in bankruptcy. The office of appointor is a personal appointment – in the same way as the role of executor of an estate or a guardian – and does not pass to the trustee in bankruptcy.

Nevertheless, a well drafted appointor clause of a discretionary trust has an appointor stripping provision which provides that where a person occupying the office of appointor commits an act of bankruptcy, he or she is replaced by another risk-free person.

However be aware of s302B of the Bankruptcy Act which declares void any provision in the trust deed which prevents the trustee from exercising a discretion in favour of a bankrupt beneficiary.

Richstar Enterprises

This is the case of ASIC v Carey (Australian Securities and Investments Commission: in the matter of Richstar Enterprises Pty Limited) – Federal Court in 2006.

In that case, ASIC had obtained orders that receivers be appointed to the property of a number of Westpoint directors and also to companies controlled by them. The reason it applied for the orders was to seek to preserve the property of the individuals and companies so that their assets would not be dissipated depending the ASIC enquiries.

Justice French (as he then was) analysed the case law on discretionary trusts exhaustively.

He noted that a trustee of a discretionary trust can either have

  1. a general power (i.e. a power to distribute to any person including the trustee);
  2. or a special power;
  3. or a hybrid power

Justice French said that that the general power was “tantamount to ownership of the property concerned”.

Justice French then distinguished between exhaustive trusts and non-exhaustive trusts. He said that a non-exhaustive trust was one where the trustee has a power of accumulation.

He also distinguished between a closed class of beneficiaries and an open class of beneficiaries. A closed class of beneficiaries was one used to describe a defined or closed group of persons (e.g., “Fred, Mary and John”).

He then went on to say at paragraph 36,

“…a beneficiary [of a discretionary trust]…at arms length from a trustee, does not have a ‘contingent interest’ but rather an expectancy or mere possibility of a distribution…On the other hand, where a discretionary trust is controlled by a trustee who is in truth the alter-ego of a beneficiary, then at the very least a contingent interest may be identified because ‘it is a good as certain’ that the beneficiary will receive the benefits of distribution either of income or capital or both”.

With respect I think that Justice French has got it wrong. In a wealth preservation and tax planning context it might well be said that “it is as good as certain that” the beneficiary will not receive the benefits of distributions, either of income or capital or both.

Practical Conclusions in relation to discretionary family trusts which arise from this case:

Without going through his analysis in full, one can summarise his conclusions by saying that only by one clearly removing control of the appointor and the trustee and ensuring the trust is non-exhaustive and the classes are open and not closed, can any discretionary trust be seen to avoid the risk of being the subject of a particular beneficiary’s control.

We have been waiting for a case to come along by which a bankruptcy trustee argues that a bankrupt controlled the trust and therefore the assets are his. This has not happened and this case has been by and large restricted to its facts but it sounds a warning for those of us involved in asset protection.

Section 120 of the Bankruptcy Act

Section 120 deals with claw back rights where assets are transferred at less than market value.

Section 120 provides inter alia that if the transferor was solvent at the time of the transfer and if the transfer was not to a “related entity” (e.g., not to a relative of the person – see s 5 of the Bankruptcy Act) then the right of the trustee in bankruptcy to reverse the transfer is limited to transfers which occurred within 2 years before the commencement of the bankruptcy.

If the transferor was solvent at the time of the transfer but the transfer is to a related entity then the claw back period is 4 years.

In any other case the claw back period is five years.

As you would recall, the commencement of bankruptcy is the time of the earliest act of bankruptcy (e.g. non compliance with the bankruptcy notice) committed within 6 months preceding the date of filing of the creditors petition – s 115 of the Bankruptcy Act.

In addition, s 120(3A) establishes a rebuttable presumption that the transferor was insolvent if it is established that the transferor at the time of the transfer:

a) had not kept such books…, as are usual and proper in relation to the business carried on by the transferor; or

b) having kept such books…, has not preserved them.

A safety net for this section is the transferee paying market value. Whilst this does not reduce the net worth of the transferor immediately, the transferor can consume the value on living, school fees, holidaying etc.

Section 121

This section is dependant upon motive but not on time. In the case of Cummins (2006) HCA 6, a transfer 15 years prior to the hearing of the case was found void against the trustee in bankruptcy.

Under s 121, the transfer is void if:

– the transferor’s main purpose was to prevent the transferred property from becoming divisible among the transferor’s creditors (or to hinder or delay that process).

If you can reasonably infer from all the circumstances that the transferor was at the time of the transfer insolvent or about to become insolvent, then the transferor is taken to have the required “main purpose”.

What of s121?

If a person is about to engage in a financially risky enterprise and transfers assets to a discretionary trust before commencing business, can s121 help the trustee in bankruptcy where at the time of the transfer there are no unsatisfied creditors and none foreseeable? In the case of Cummins [2002] FCA 1503 at the Federal Court, Sackville J said in paragraphs 134 to 136, that:

“I am prepared to assume that if all that is known is that a professional person:

– transfers the bulk of his or her assets to a family member for no consideration;

– has no creditors at the time of the transfer (or retains assets sufficient to meet all liabilities known at the time);

– is not engaged and does not propose to engage in hazardous financial ventures; and

– intends to protect the transferred assets from any action brought by a client who might in the future sue for professional negligence (there being no such a suit in the offing at the time of the transfer);

then s121(1)(b) of the Bankruptcy Act does not render a transfer void against the person’s trustee in bankruptcy.

It is hard to draw any comfort from the above dicta and the High Court did say in paragraph 29 to 33, that it was enough to be aware of pending liabilities to be caught by the section but did not consider the wider question of general asset protection. And that’s what brought down Mr Cummins – as a barrister not paying any tax at the time of the transfer to his wife, he must have been ‘aware of pending liabilities’.

However, what is one to do? There is really no choice but to make the transfer and suffer the consequences, if any, later.

Cummins

Full citation: The Trustees of the property of John Daniel Cummins, A Bankrupt -v- Cummins [2006] HCA 6.

Mr Cummins was a barrister who did not lodge a tax return for 45 years. He lodged his first tax return as a senior counsel in the late 1990s and a flurry of litigation then ensued.

In 1970, Mr and Mrs Cummins purchased a property at Hunters Hills as joint tenants for $31,000. In 1987, he transferred his half share to Mrs Cummins. He became bankrupt in 2000.

The trustee in bankruptcy commenced proceedings in respect to the 1987 transfer.

The High Court referred to the long standing presumption between husbands and wives (and certain other relationships), to the effect that where it is the husband who has contributed a greater percentage of the purchase price, then the court presumes that in a transfer from husband to wife he intended this transfer to be a gift to his wife.

This presumption can be found in the Full Court Judgment, paragraph 71, quoting Scott, The Law of Trusts (4th edition) 1989 volume 5 at paragraph 454 at 239.It has been described in the text by Meagher and Gummow, Jacobs Law of Trusts in Australia (5th edition) at [1212] as operating “where the legal title is, on a purchase, vested in someone whom the person providing the purchase money is under an obligation to support, namely, his wife, child or someone to whom he stands in loco parentis. There is a presumption that the property was vested as an absolute gift or as an advancement.”

Could Mr Cummins rely on this presumption? No. The High Court in Cummins re-wrote the law for the modern age.

“Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one half interest in the property, regardless of the amounts contributed by them.”

Accordingly the Court’s judgment now gives a husband and wife a 50% share in the equity of the matrimonial home:

a) where the title is in both names but contributions to its purchase were unequal; and

b) even where the title to the property is only in one name and the contributions to its purchase were unequal.

Therefore, pursuant to the High Court’s decision in Cummins, the bankrupt’s wife will be presumed to hold the whole of the matrimonial property on trust for herself and her husband as to one half share each.

The High Court also cut off at the pass the idea of reinventing the wheel and executing documents today to prove a bankrupt’s intention where he purchased a matrimonial property many years ago.

The High Court said “The only evidence that is relevant and admissible to set aside this new presumption comprises the acts and declarations of the parties before or at the time of the purchase.”

The Bankruptcy and Family Law Legislation Amendment Act 2005 (BFLLA)

Before the BFLLA, a non-bankrupt spouse who had separated from the bankrupt whether before or after commencement of the bankruptcy, could have been left out of any distribution of the bankrupt’s assets.

The government recognised that this could lead to hardship for non-bankrupt spouses and the children of the marriage or relationship. Accordingly, it shifted the balance of power in favour of the non-bankrupt spouse by allowing the Family Court to determine a property application against the trustee in bankruptcy.

But what if the non-bankrupt spouse does not wish to separate from the bankrupt or divorce or file for property orders? In those circumstances the non-bankrupt spouse and the children are unable to make any claim against the bankrupt estate.

But if say, Mrs Smith, is thinking of leaving her husband she should make an urgent application against the trustee in bankruptcy seeking spousal maintenance on an interim basis as well as a property application pursuant to the Family Law Act 1975. The Family Court will consider her non-financial contribution to the marriage together with the needs of her children, and recent cases have shown that Mrs Smith is almost certainly likely to receive significantly more than 50% of the matrimonial property to the exclusion of the husband’s creditors.

Bankruptcy Legislation Amendment (Anti-Avoidance) Act 2006 (BLAAA)

Where a person transfers his half interest in his property to his wife in consideration for the right to live there for the next 10 years, this would be insufficient (see s121(6)(e) Bankruptcy Act 1966) to amount to consideration to avoid the application of s121 which was discussed earlier. Accordingly the trustee in bankruptcy could still seek to claw back the asset even though the transfer took place many years ago.

But this does not apply where the arrangement is sanctioned by Family Court orders.

Division 4A- Trust Busting Provisions Go Bust

This division (s139A-s139H of the Bankruptcy Act 1966) was introduced in the late 1980s but for many years was almost useless for trustees. It is still rarely used.

To use these provisions, the trustee has to show that:

a) the bankrupt controls an entity;

b) he provides personal services to the entity;

c) at an undervalue;

d) the entity holds property;

e) the entity acquired property as a direct or indirect result of the supply by the bankrupt of the personal services;

f) the bankrupt enjoys the use or benefit of that property.

A classic example of the failure of this division is in the case of Mr Birdseye [2002] FMCA 41 and then on appeal Birdseye v Sheahan (2002) 196 ALR 598.

The bankrupt (Mr. Birdseye) was trustee of a discretionary trust which carried on an accounting practice. He had rendered personal services to the trust at an undervalue – only being paid $15,000 by way of salary for a years work.

The trust made loans to Mrs Birdseye which were used by her to pay the mortgage over the family home which she owned and to pay personal expenses. The loan to Mrs Birdseye was the property of the trust which had been identified by Mr Birdseye’s trustee.

Carr J held that the amount owed by Mrs Birdseye to the trust was the relevant property and held that the bankrupt did not enjoy, nor did he have the use or benefit of that property. The bankrupt enjoyed the use or benefit which arose from the wife’s expenditure (i.e. paying the mortgage over the matrimonial property) not her indebtedness to the trust. It was clear that Mr Birdseye benefited indirectly (see s19 to Schedule 1 to the Bankruptcy Legislation Amendment (Anti-Avoidance) Act 2006)and it is now the case that a direct or indirect enjoyment of property of the entity will suffice but as I have said the division has been rarely relied on, mainly because of the cost of the litigation.

But s 139DA has helped bankruptcy trustees.

It requires, for any period up to 5 years before the bankruptcy:

a) the person to acquire an estate in a particular property;

b) as a direct or indirect result of financial contributions made (not services supplied) by the bankrupt; and

c) the bankrupt used or derived a direct or indirect benefit from the property; and

d) the person still has the property.

If these issues are made out, then the Court can order that the property or an interest in it be transferred to the trustee in bankruptcy.

This applies, for example, where the non-bankrupt spouse acquires a family home and the bankrupt contributes funds for the purchase or where the bankrupt makes mortgage payments in respect to the family home. Arguably, payments of rent to the spouse by the bankrupt could also be caught.

The second way of attacking the wealth of a natural person is by the application of s139EA which applies where:

a) the value of a person’s interest in a property is increased;

b) as a direct or indirect result of financial contributions made by the bankrupt;

c) the bankrupt used or derived a direct or indirect benefit from the property; and

d) the person still has the property.

This section applies to CPI increases or asset price rises for houses or shares for example.

One of the most unfair aspects of Division 4A is that the only recourse that a person who has been unsuccessful in defending a trustee’s claim to property is for the unsuccessful party to prove as a creditor in the bankruptcy. The unsuccessful party’s claim is postponed until all other claims have been satisfied (s139H of the Bankruptcy Act).

Bankruptcy and Sham Trusts

Aravanis

Mary Gillespie was 75 years old. She had 5 children (including Ian and Peter). She had to sell the family home in order to pay out the mortgage taken out by her and her late husband, leaving her with $256,000 post-sale. A suitable new house was found selling for $371,000. Peter agreed to take out a loan for the amount required to make $371,000. The arrangement was that Peter would pay off the mortgage, so that Mrs Gillespie would have a place to live. The property was put in Peter’s name, and he would be repaid what he had borrowed to fund the purchase and all the interest payments he was to make, once the property was sold (presumably on Mary’s death).

Before long, Peter’s payments towards the mortgage became scarce. It was agreed that Ian would take it over. Peter was to transfer the property to Ian so that their mother would not be homeless. Peter sold the property to Ian, and Ian took a loan with ME Bank to pay out Peter’s mortgage on the house and his contributions.

Ian continued paying the mortgage, selling the house a few years later (July 2013). From the sale proceeds, ME Bank was paid out, Ian’s mortgage payments were paid, and the remaining $130,000 went into a trust account. By that time, Peter had become a bankrupt.

Peter’s bankruptcy trustee argued amongst other things that Peter had a resulting trust having contributed 54.4% to the purchase price.

The resulting trust argument if successful would give the Bankruptcy trustee the $130,000. The resulting trust argument was that under the general law, there is a presumption that the property is held in proportion to the contributions of the parties, unless the parties intended otherwise.

The Gillespies argued that Mrs Gillespie was the beneficiary of a constructive trust where Peter was the trustee. Upon transfer of title to Ian, Peter had no interest in the property at all, and so had no claim to the $130,000 in the trust.

The FCA held that there was no resulting trust. The common intention between Peter and Mrs Gillespie was that he would hold the property on constructive trust for her, this role of constructive trustee later being held by Ian. This was the case because it was the intention of the parties to have Peter buy the property so that Mrs Gillespie would ‘have a roof over her head’, and Peter was expecting repayment of the principal that he borrowed and his contributions to the mortgage payments that he had agreed to pay, once the property was later sold. The Court said that this arrangement is only logical if Peter was to have no beneficial interest in the property.

Condon v Lewis

In 2001, Colleen Lewis caused Appinville Pty Ltd (Appinville) to buy a property at Kenthurst.

Later that year, the Kenthurst Investments Trust was established, naming Appinville as trustee and Colleen as appointor. Colleen was also the first corpus beneficiary.

In 2005, Colleen disclaimed her rights as a potential beneficiary. Colleen retired as appointor. Appinville retired as trustee. Louise, Colleen’s daughter, became the appointor and Colleen became the new trustee. In 2011, Louise removed Colleen as trustee. In 2012, Colleen was made bankrupt.

The bankruptcy trustee argued that Colleen’s disclaimer was a sham, and that the trust was a sham, Colleen’s appointment as trustee was a sham, her retirement as appointor was a sham, and her removal as trustee was a sham.

The Court concluded that the trust was not a sham as legal consequences were intended. The Court said that the test for a sham trust is the common intention of the parties. The Court went on to say that it is essential that there be an intention that the true transaction be different from that which would ordinarily be attributed to the transaction on the face of the documents.

Setting aside the bankruptcy trustee’s Notice of Objection to Discharge

Kneipp v Jonsson [2012] FMCA 828
In this recent case, the bankrupt had a history of not co-operating with the trustee’s investigations and had obstructed them to a substantial degree. Moreover, the trustee’s investigations had not been completed. The trustee filed objections to the bankrupt’s discharge.

The bankrupt then made numerous applications against his trustee seeking to set aside the trustee’s Notices of Objection to Discharge. The bankrupt initially sought review by the Inspector General, but the Inspector General confirmed the trustee’s decisions. The bankrupt could then have applied to the Administrative Appeals Tribunal to seek a further review of the trustee’s decisions, but he applied to the Court instead.

The bankrupt argued that the Notices of Objection had persuaded him to comply with the trustee’s outstanding requests, and that the notices were therefore irrelevant.

The trustee disagreed, arguing that the information had been obtained by the trustee from third parties and not from the bankrupt.

The Court said that the bankrupt’s non-compliance with the trustee’s request for this information which the trustee had subsequently acquired from others was therefore trivial in the circumstances and it could not support the trustee’s Notice of Objection.

However, the trustee genuinely believed that there was a good reason to continue with the bankruptcy – as he believed he was not far from discovering the whereabouts of substantial funds. The Court accepted that there was a benefit in maintaining the bankruptcy and therefore upheld the Notices of Objection on this ground.

Section 197 Corporations Act

Section 197(1) – A person who is a director of a corporation when it incurs a liability while acting, or purporting to act, as trustee, is liable to discharge the whole or a part of the liability if the corporation:

(a) has not discharged…the liability…; and

(b) is not entitled to be fully indemnified against the liability out of trust assets…

Superannuation & Trusts

Section 116(1)(a) says that:

“All property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired… after the commencement of the bankruptcy … is property divisible among the creditors of the bankrupt.”

But property covered by s116(2) is excluded from s116(1)(a).

Section 116(2)(d) says:

“Subject to s128B and s128C:

(i) policies of life assurance are not divisible property; and

(ii) the proceeds of such policies are not divisible; and

(iii) the interest of the bankrupt in:

  1. A regulated superannuation fund is not divisible….

Without going through the whole section, a summary of s 116(2) is that if a bankrupt has a balance in a regulated superannuation fund, then that amount is protected even if it is considered to be the property of the bankrupt. Proceeds of life insurance are protected, and superannuation splits in Family Law are also protected, as well as damages for personal injury and death.

Pensions

The section does not protect payments from superannuation funds that are pensions.

Also, s 116(2)(d) does not offer protection where the fund is not a regulated superannuation fund. A fund is regulated if it has made an election to become regulated under s 19 of the Superannuation Industry (Supervision) Act 1993.

In addition, bear in mind that amounts paid to the bankrupt from a superannuation fund prior to the commencement of the bankruptcy are not protected.

Changes from 1 July 2007

They are to the effect that bankruptcy trustees can recover superannuation contributions on or after 28 July 2006 where their payment was made with intent to defeat creditors. These provisions are set out in sections 128B and 128C of the Bankruptcy Act.

Section 128B

A transfer is void against the bankrupt trustee under s 128B if:

(a) the transfer is made by way of a contribution to an eligible superannuation plan; and…

(c) the transferor’s main purpose in making the transfer was

i) to prevent the transferred property from becoming divisible among the transferor’s creditors;…

The section goes on to state that showing the transferor’s main purpose will be made out if it can be reasonably inferred from all the circumstances that at the time of the transfer, the transferor was or was about to become insolvent (s 128B(2)).

Also, in determining whether the transferor’s main purpose was to “defeat creditors”, regard must be had to the pattern of contributions of the transferor, and whether the particular transfer was out of character (s 128B(3)).

Section 128C Bankruptcy Act

Section 128C is similar to s 128B except that it relates to contributions by third parties – for example, employers or creditors

Forfeiture and bankruptcy

(a) Bankruptcy Act

It used to be common for a superannuation fund trust deed to have provisions forfeiting a member’s superannuation benefit if the member were to become bankrupt.

However, s 302A of the Bankruptcy Act provides that where the beneficial interest of a member of a superannuation fund is cancelled, forfeited, reduced or qualified if the member becomes bankrupt or commits an act of bankruptcy or executes a deed of assignment or a deed of arrangement under the Bankruptcy Act, then the provision is void.

(b) The deed

Many superannuation fund trust deeds also use the concept of ‘vested benefits’. If an interest in property is vested, then the beneficiary has an immediate fixed right to present or future enjoyment.

Vested benefits are essentially the member’s property. But since 1 July 2007 all contributions for self managed super funds must be allocated to a member within 28 days of the making of the contribution. So the argument that certain property in a super fund had “not vested” has very rarely been run in recent times.

(c ) Part IVA

The ATO is likely to consider that Part IVA applies to forfeitures in any event.

(d ) Reserves

Another way forward would be to allocate as much investment income as possible to a reserve account. But you need a reason. Remember the sole purpose test. The SIS legislation provides for the establishment of reserve accounts, access to which is allowed to smooth returns from year to year. They are accordingly not “vested”.

However, since the 1 July 2007 amendments their usefulness has been largely eroded.

A bankrupt has at least a contingent interest in a reserve account and so the funds in a reserve account should not be available to creditors under s116 of the Bankruptcy Act if the member were to become bankrupt – see section 116 (2) (d) (iii). But is this correct? It seems that an alternative view is that it has not been allocated to the member and may never be allocated to him. On that basis, it could be subject to forfeiture, unless s116(1)(b) applies. That subsection is to the effect that property divisible amongst the creditors of the bankrupt includes the right to take proceedings in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy.

Income contributions by a bankrupt

Income is defined in s139L. Section 139L states that income includes an annuity or pension paid to the bankrupt from a superannuation fund. However, s 139L does not expressly include lump sums and one view is that the better view is that lump sum payments from superannuation funds are not income for the purposes of the Bankruptcy Act.

Transfer of Business Real Property into Superannuation

SMSFR 2009/1 defines “Business Real Property”.

Section 66 of the Superannuation Industry (Supervision) Act 1993

(1) … A trustee… of a regulated superannuation fund must not… acquire an asset from a related party of the fund.

(2) Subsection (1) does not prohibit a trustee… acquiring an asset from a related party of the fund if:…

(b) the fund is a superannuation fund with fewer than 5 members – the asset is business real property of the related party acquired at market value…

“market value” in relation to an asset, means the amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller if the following assumptions were made:

(a) that the buyer and the seller dealt with each other at arm’s length in relation to the sale;…

This tells you that the super fund has to pay for the transfer. No in specie transfers, CGT rollovers or anything other than cash.

Section 62A of the Duties Act

And if you make the payment at market value, then you should receive the OSR duty exemption under s 62A Duties Act 1997.

But you don’t need a purchase, just a transfer. Section 66 talks about an acquisition not a purchase.

Section 55 of the Duties Act

However, if you are having the super fund borrow money to fund the transfer then you need a “purchase” for “money” because s 55 (the apparent purchaser provision of the Duties Act 1997) refers to a purchase for money.

A mere transfer is not sufficient. You need a contract for purchase. Otherwise you won’t get the exemption under s 55 of the Duties Act.
Have a look at the Landfall case – [2012] NSW ADT 270. It dealt with section 55 of Duties Act and the meaning of “purchase” and “money”. It discussed a promissory note in the sum of $520,000. The Promissory Note was unquestionably an asset of the Superannuation Fund.

The facts were that Landfall Pty Ltd was to acquire the property as custodian of a bare trust for the absolute benefit of the Superannuation Fund.

Stephen and Annabel Gunns were the trustees of the Superannuation Fund.

The sequence of events with respect to the Promissory note constituted, so the Chief Commissioner contended, a clear and circular round robin.

The promissory note was passed from the Superannuation Fund to Landfall Pty Ltd to fund the purchase. It went from Landfall Pty Ltd to Stephen and Annabel Gunn in their personal capacity as a loan by Landfall Pty Limited to them personally, and then it was handed back to Stephen and Annabel Gunn as trustees of the Fund as a contribution to the fund.

The Tribunal said:

The fact that there was no evidence of any kind as to the loan in the sum of $520,000 must have a bearing on the finding by the Tribunal that all of the transactions in respect of the Promissory Note did indeed constitute a round robin and whereby in respect of the acquisition by the Superannuation Fund of the property no monetary consideration of any kind either changed hands or for that matter, was intended to change hands.

The long and short of the decision is that if you want to use s 55 or s 62A of the Duties Act, you must show that money has been paid and received.

If you want further information in relation to this topic, please call our estate planning lawyer in Sydney on 02 99640022 or email : leigh@lalawyers.com.au