What is a Bare Trust good for?
You may feel vulnerable in the public and reporters knowing what land you own. It is no one's business, other than yourself, and the ATO, of course. You transfer your real estate to a bare trustee for no stamp duty or CGT. When someone does a search at the local titles office your name does not appear anywhere.
How do they work?
Before the Bare Trust is created the beneficiary is both the legal and equitable owner. Therefore, there is no trust in existence since the 'legal owner' and 'beneficiary owner' are the same person. In other words, the beneficiary, before this Bare Trust is signed owns both the 'legal' and 'equitable' interest in the asset.
In the Bare Trust the beneficiary transfers to the trustee legal ownership only. Under the Bare Trust the beneficiary retains the beneficial interest in the asset. The Trustee only takes on the legal ownership. Neither before nor after the Bare Trust does the Trustee have any beneficial interest in the asset. The beneficial owner remains the beneficial owner.
The ATO and stamps office look through the trust and see that the 'true' owner, the beneficial owner has not changed. Therefore, there is generally no stamp duty or CGT implications. The beneficial owner (not the legal owner) continues to pay tax on any income generated by the asset. The beneficial owner continues to be liable for the costs of maintaining the asset.
Nothing changes except that the asset is now in the hands of another person - the trustee. For example, if it was land your lawyer would prepare a transfer and transfer the property, pursuant to the Bare Trust, to the trustee, generally, without any CGT or stamp duty.
For more legal advice telephone us. We are a law firm. We can help you answer the questions.
Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
39 Stirling Highway, Nedlands, WA (Post Office Box 5169, Dalkeith, WA 6009)
Direct: 08 6389-0400
Reception: 08 6389-0100