Since the introduction of the new Duties Act (WA) in 2008 (“the Act”), we have received a lot of queries about what the duty implications are if the unit holders are not identifiable when a unit trust is set up. 

The first point to note is that most unlisted unit trusts are established by subscription; that is, the initial unit holders subscribe for units in the unit trust by paying a set amount for each unit and, in return, the trustee issues them with the requisite number of units. Accordingly, unit trusts cannot be set up without an initial unit holder or holders. In the majority of cases, a deed creating an unlisted unit trust is not subject to duty.

Furthermore, if the unit trust is not a ”landholder”, any subsequent issue of units to new or existing unit holders will not attract duty, and so can be set up with just one unit holder initially, while others are added later, and their unit holdings can also be changed at a later date.

Secondly, if the unit trust is a ‘landholder’, then the duty implications will need to be examined, if there is any change to the unit holders or their unit holdings. A unit trust is a ”landholder” if it holds, directly or indirectly, Western Australian land valued at $2 million or more.

In general terms, Landholder Duty will be payable under the Act in such a case if there is a change in unit holdings or a transaction that is: 

• an acquisition of a 50% or greater interest in the unit trust where no interest has previously been held by the person acquiring the interest (“the acquirer”), or a “related person”; or
• an acquisition resulting in a 50% or greater interest where the interest previously held by the acquirer and a “related person” (if any) did not amount to a significant interest; or
• an acquisition of a further interest by a person, where the interest held by the acquirer and any “related person” prior to the acquisition amounted to a 50% or greater interest.

The Act contains a list of “related persons” (s. 162) which includes the following:

• individuals who are spouses, or de facto partners, of each other;
• individuals who are parent and child;
•  related corporations;
• a trustee and another trustee if there is any beneficiary common to the trusts of which they are trustees, whether the beneficiary has a vested share or is contingently entitled or is a potential beneficiary under a discretionary trust;
• an individual and a corporation if the individual is a majority shareholder, director or secretary of the corporation or a related corporation;
• an individual and a trustee if the individual is a beneficiary under the trust of which the trustee is a trustee, whether the person has a vested share or is contingently entitled or is a potential beneficiary under a discretionary trust;
• a corporation and a trustee if the corporation or a majority shareholder, director or secretary of the corporation, or a related corporation is a beneficiary under the trust of which the trustee is a trustee, whether the beneficiary has a vested share or is contingently entitled or is a potential beneficiary under a discretionary trust;
• persons or entities that acquire interests in a landholder by virtue of acquisitions that together form or arise from substantially one transaction or one series of transactions;
• persons or entities that acquire interests in a landholder by virtue of acquisitions that arise from those persons or entities acting in concert with each other.

It is unclear what constitutes “acting in concert”. According to a Public Ruling by the Tasmanian Commissioner of State Revenue, however, parties will be considered to be acting in concert where there is an understanding or arrangement between the parties as to a common purpose or object.

Under s. 162(2) of the Act, the Commissioner of State Revenue has the discretion to decide that a person (but not a corporation) is not a “related person” if the parties are not acting in concert with one another in respect of the relevant acquisition, and the interests that are being acquired are acquired independently and are not being acquired for a common purpose (s. 162(3)).

1. A unit trust must be established with at least one unit holder;
2. If the unit trust is not a “landholder”, then additional unit holders can be added later, and their unit holdings can also be changed;
3. If the unit trust is a “landholder”, however, then the “Landholder Duty” provisions of the Act explained above will apply.

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