Be Ready for the Perpetuity Period Extension

key takeaways

On 23 February 2023, the Property Law Bill 2023 (Qld) (Bill) was introduced into Parliament. It was very quickly passed with amendment on 25 October 2023. This Bill will replace the Property Law Act 1974 (Qld) (PLA)
The purpose of the Bill and the rewrite of the PLA is to replace the PLA with a newer and more modernized version of the act, including the perpetuity period extension. This increases the perpetuity period from 80 years to 125 years!
Whilst the new PLA start date is unknown, accountants, clients and practitioners can take steps now to extend the perpetuity period and/or termination date under any trust deeds.
By taking steps to vary a trust deed now, it means when the new PLA commences, the perpetuity period will already be extended and any issues that may arise to extending the perpetuity period can be uncovered early.

Rule Against Perpetuities

As my colleague, Emily Ryan, noted when the Bill was initialled introduced in February 2023

"Dispositions of property to some trusts are subject to a perpetuity period to prevent those trusts from continuing forever, and to ensure that the benefits eventually pass through to beneficiaries. Currently, the PLA provides that the perpetuity period is no longer than 80 years from the time the disposition was made."

For a trust, practically, this means that the property can only be held on trust for up to 80 years from the date the trust was established.

However, the implementation of the Bill and new act, amends the perpetuity period to 125 years or a shorter period if one is set out in the terms of the trust. This change effectively extends the perpetuity period for trusts from 80 years to 125 years.

However, the date each trust terminates, or vests will depend on the terms of the trust deed. Generally, most trust deeds will hard wire the 80-year perpetuity period and as such, in order to have access to the 125-year perpetuity period, the trust deed will need to be amended.

Even with the changes to the PLA, it will be necessary to carefully review the trust deed to make sure changing the vesting date won’t cause any issues – in particular, that no trust resettlement will occur for taxation purposes.

Consequences

If a trust’s perpetuity period expires, there can be a raft of consequences for the beneficiaries and/or trustee depending on the terms of the trust. The vesting can have capital gains tax implications and duty consequences (if the trust owns dutiable property).

By taking advantage of the extended perpetuity period, trustees and beneficiaries can delay the occurrence of any adverse events.

Extend the Perpetuity Period Now

Although, the new PLA does not have a start date, accountants, practitioners, and clients can get in early and update their trust deed to ensure that the perpetuity period aligns to the 125-year period allowed by the relevant legislation.

By doing so, you can “beat the rush”, uncover any issues to extending the perpetuity period early and take control of the perpetuity period extension to provide comfort that the trust deed’s perpetuity period will automatically be extended upon the new PLA start date.

how can mcw help?

We can assist with reviewing and varying the trust deed to extend the perpetuity period, termination, or vesting date to 125 years from the date the trust was established.

If you have a trust, whether it is a discretionary trust, unit trust, hybrid trust or testamentary trust please contact our office to discuss varying the trust now.

We can assist you to be on the forefront of these changes and to be ready for the start date of the new perpetuity period extension!