Converting your trust? Beware the state duty trap.

The 2026–27 Federal Budget announced a three-year rollover from 1 July 2027 to assist clients to restructure out of discretionary trusts before the new 30% minimum tax takes effect on 1 July 2028. The rollover removes federal CGT consequences on the restructure. It does not touch state stamp duty.

For trusts holding rental property, that omission is where the entire planning conversation should begin.

The federal rollover only covers federal taxes

The rollover is a Commonwealth measure. Its operation is confined to income tax and capital gains tax consequences. It has no effect on transfer duty, landholder duty, foreign purchaser additional duty, surcharge purchaser duty, land tax or land tax surcharges. Each of these is governed by separate State or Territory legislation, and any relief must come from the relevant State or Territory — none of which has yet committed to matching relief.

A restructure that is CGT-neutral under the federal rollover may still trigger a six- or seven-figure duty liability under state law.

Why deed amendments are dutiable

A beneficiary of a discretionary trust has no equitable interest in the trust property — just a right to be considered and to have the trust administered properly. A fixed beneficiary, unitholder, or shareholder has a present proprietary interest.

When a deed is amended to convert discretionary entitlements into fixed entitlements, new beneficial interests are created where none existed before. In NSW, Victoria, Tasmania and elsewhere, this falls within the "change in beneficial ownership" or "declaration of trust" provisions and is dutiable on the full unencumbered value of the trust's land. Existing mortgage debt does not reduce the base. For a $5 million residential portfolio, the duty exposure can readily run into the hundreds of thousands of dollars before any foreign purchaser surcharge is added.

The "same trust" trap

A common assumption is that amending the existing deed must be cheaper than transferring assets to a new entity. For stamp duty, the position is generally the opposite. The duty trigger is the creation of new beneficial interests, which happens whether the change is effected by deed amendment or by asset transfer. A transfer to a new entity at least allows assessment against any available corporate reconstruction concessions. An in-place amendment provides no such anchor.

For property-heavy discretionary trusts, the state duty exposure is often the binding constraint on the restructure decision — and it must be modelled before any deed work is undertaken.

General information only, current at the date of publication. Not legal or tax advice.