The New South Wales Civil and Administrative Tribunal Appeal Panel’s decision in Nunc Coepi P/L atf Vieira FUT v CCSR [2025] NSWCATAP 229 considered the New South Wales fixed and special trust provisions.
https://www.caselaw.nsw.gov.au/decision/19a9537399728c665e45bf63
It provides insight into the interpretation of section 3A of the Land Tax Management Act 1956 (NSW) (LTMA) and considered the interpretation of the relevant trust deed provisions.
In New South Wales, fixed trusts get the benefit of a land tax-free threshold but special trusts do not. This is a saving of $17,100 a year in land tax.
The Appeal Panel concluded that a trust’s constitution requires a degree of certainty as to the terms necessary to make the Trust a “fixed trust” within the meaning of s 3A and whether objectively, through the eyes of a “reasonable business person”, an intention could be discerned from both the provisions of the trust deed and the actions of the Trustee.
Nunc Coepi Pty Ltd as trustee for the Vieira Family Unit Trust held land in New South Wales. The Chief Commissioner assessed it to land tax on the basis it was a special trust. The trustee objected to the assessment, which was denied and then applied to the NSWCAT for review, which was also denied at first instance.
Section 3A of the LTMA
Under subsection 3A(2), a trust is a fixed trust if “the equitable estate in all of the land that is the subject of the trust is owned by a person or persons who are owners of the land for land tax purposes”.
A trust is also deemed to be a fixed trust if the trust satisfies the “relevant criteria” in subsection 3A(3B), these are:
(a) the trust deed specifically provides that the beneficiaries of the trust—
(i) are presently entitled to the income of the trust, subject only to payment of proper expenses by and of the trustee relating to the administration of the trust, and
(ii) are presently entitled to the capital of the trust, and may require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust property,
(b) the entitlements referred to in paragraph (a) cannot be removed, restricted or otherwise affected by the exercise of any discretion, or by a failure to exercise any discretion, conferred on a person by the trust deed,
(c) if the trust is a unit trust—
(i) there must be only one class of units issued, and
(ii) the proportion of trust capital to which a unitholder is entitled on a winding up or surrender of units must be fixed and must be the same as the proportion of income of the trust to which the unitholder is entitled”
The tribunal considered how a trust deed could be brought into the definition of fixed trust.
This could be achieved by incorporating the wording of subsection 3A(2) – ie by providing in the trust deed that the equitable estate in all of the land that is the subject of the trust is owned by the unitholders.
This could also be achieved by amending particular provisions of the trust deed to satisfy the “relevant criteria” under subsection 3A(3B).
The trust deed – clause 2.9
Clause 2.9 of the trust deed provided:
If the Trustee is obliged to conduct the Trust:
(a) as a Non-Geared Unit Trust, the most logical provisions conceivable not expressed in this Deed necessary to enable compliance with Division 13.3A of the Superannuation Industry (Supervision) Regulations 1994 to permit the Trustee to either act or to refrain from acting in a manner those regulations allow shall be taken to apply to this Deed as provisions of this Deed overriding the express provisions of this Deed; or
(a) a Fixed Trust where the Trust owns real estate in New South Wales the most logical provisions conceivable not expressed in this deed necessary to enable the Trust to be a Fixed Trust shall be taken to apply by this deed as provisions of this deed overriding the express provisions of this deed excepting paragraph (a).
The trustee relied on clause 2.9 as evidence of an “over-ride clause”.
However, the turbinal held that clause 2.9 did not mirror any of the relevant criteria, nor did it appear to operate expressly or automatically as an override to other clauses in the Deed. Although the word “overriding” was used, the Tribunal found that when read in the context of the trust deed as a whole, it was not objectively possible to construe the clause in such a way as to detect an intention to meet the definitional requirements of a fixed trust under the LTMA.
In particular, there was no certainty in the trust deed as to what terms necessary to make the trust a fixed trust were to be incorporated. Further, there was not criteria for determining whether the trustee was obliged to conduct the trust as a fixed trust.
On that basis, the trust was correctly assessed as a special trust.
Impact of the decision
This decision illustrates the importance of proper drafting of trust deeds if a particular land tax or State Tax treatment is desired.
Other trust deed drafting issues arise for foreign stamp duty or land tax surcharges where a poorly drafted or missing clause can lead to high stamp duty or land tax surcharges.
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Please contact us with any questions on State Tax issues.
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au
This update was prepared with the assistance of Priya Anand, Seasonal Clerk.
