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Double Transfer Duty Trap

I have an attorney friend and client who was about to buy a residential property for rental and quite rightly wanted it to be owned by a company within a trust. The problem was that he didn't have a trust yet and in those days we didn't have shelf trusts. He needed to sign the deal straight away and asked my advice.

I advised him to sign the deal on behalf of a "company yet to be formed", then form the trust, then form the company with the trust as the owner. He didn't take my advice and ended up paying transfer duty twice!

Here's why -

He bought a shelf company and signed the deal in the name of the company with himself as the shareholder. He paid Transfer Duty to get the property into the name of the company.

Then he formed a trust and sold his shares in the company to the trust. Problem! The sale of shares in a company that owns residential property is deemed to be a sale of the property itself and attracts Transfer Duty, so he had to pay again.

If he had done it my way transfer duty would only have been paid when the "company yet to be formed" acquired the property as the trust would be the original shareholder of the company.

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