A testamentary discretionary trust will (TDT) can be an effective vehicle for holding and managing assets for beneficiaries under a will. That said, the fact that an asset can be left to a TDT does not mean that the transfer of the asset, or subsequent dealings with it, will necessarily be straightforward. Shares in a private company and units in a unit trust are good examples: gifting them is simple in principle, but if the underlying company or trust holds land in Queensland, the transfer can trigger a state-based transfer duty that is technically complex.

Estate planning – assets that can pass under a will

Section 8 of the Succession Act 1981 (Qld) (Succession Act) deals with property that may be disposed of by will. As a general rule, a person’s will can bequeath anything held in that person’s own name, and sometimes but not always superannuation entitlements (subject to a valid binding death benefit nomination).^[1]

A will cannot deal with assets that are jointly owned (they pass automatically to the other joint owner), or property held by an entity (a trust or company).

What can be bequeathed to a TDT?

There is no separate rule limiting any particular class of estate assets that a testamentary trust can receive. Section 9 of Trusts Act 2025 (Qld) (Trusts Act) provides that any asset that forms part of the deceased’s estate and is capable of being validly disposed of by will can, in principle, be directed into a TDT.

Restrictions imposed by trust deeds and company constitutions

The precise treatment of shares in a Pty Ltd, units in a unit trust, or shares in a listed company are dealt with after death depends first on the company’s constitution, the trust deed, and the relevant legislation – not on the will alone.

Under section 1072A of the Corporations Act 2001 (Cth), when a shareholder dies, the company will recognise only the executor as entitled to the deceased’s shares – not any beneficiary directly. The executor is authorised to (a) be registered as the new shareholder themselves, or (b) transfer the shares directly to a beneficiary, without first registering in their own name – however section 1072A is a replaceable rule – meaning that authority is subject to the company constitution or unit trust deed which may contain transfer restrictions, pre-emption rights, or other provisions (such as director or trustee consent requirements) that need to be considered.^[2]

For listed companies, the ASX Listing Rules, including the rules relating to restricted securities, may also impose restrictions on particular securities.^[3]

Interest v underlying asset

Shares in a Pty Ltd company and units in a unit trust do not represent a right to any defined portion of the assets held by that company or trust. What the owner actually has is whatever rights attach to the shares or units themselves – and that’s governed by the governing documents of the entity in which they hold that interest.

This principle has been confirmed by the High Court in the 2005 matter of CPT Custodian Pty Ltd v Commissioner of State Revenue a case where the tax office attempted to treat people who held units in a trust as if they personally owned the land that trust held. The Court rejected that premise and confirmed that a unit only gives the holder an interest in the trust fund as a whole not “any interest in any particular part of the Trust Fund or any investment.”^[4]

What do the beneficiaries of a TDT actually receive

A major trap in estate planning is where this distinction between the interest and the underlying assets is not clearly understood. A will can only gift the shares or units themselves – not the actual property or cash held inside the unit trust or company.

Testamentary discretionary trusts and the limits of a gift

Where those shares or units are gifted into a TDT rather than to the beneficiary directly, there is a second layer: the beneficiary’s rights are then also governed by the terms of the testamentary discretionary trust itself, which sets out what they’re entitled to receive from that trust.

For example, where a family farm is held by a unit trust, and the will gifts the units to a TDT for the benefit of all the children and grandchildren, it would be a mistake to assume this secures each child and grandchild’s future interest in the family farm.

What they actually end up with depends on:

what the unit trust deed says about the income, capital, and voting rights attached to the units,
what the testamentary trust deed says about how and when each beneficiary is entitled to receive anything from it.

More importantly, control of the trust ultimately rests with whoever holds the power to appoint (and remove) the trustee – commonly the trustee itself, or a separately named “appointor” under the trust deed or will. In a TDT, beneficiaries have no fixed entitlement and hold no units; they merely have a right to be considered for distributions at the trustee’s discretion. Accordingly, real control of the trust’s future lies with whoever holds that appointment power – not with any individual beneficiary.

A poorly drafted will can leave beneficiaries with an interest in a TDT that carries little real power at all.

Landholder duty — and why it gets complicated

The transfer of units and shares to beneficiaries is (usually) a tax-exempt transaction under section 124 of the Duties Act 2001 (Qld) (Duties Act) however, whilst the initial distribution may be exempt, it does not follow that later dealings with those shares or units will also be exempt.

This is because the exemption is a one-off concession tied to the distribution under the will — it does not carry over to a later sale, transfer, or restructure.

One complication occurs if the underlying company or trust qualifies as a ‘landholder’ under the Duties Act – that is, it holds Queensland land worth $2 million or more.^[5]

What counts as a landholding and how does duty attach?

Landholding includes fixed assets

For Queensland Revenue Office (QRO) purposes, when determining the value of an entity’s “landholding” it is not limited to a registered interest in the land itself. It extends to assets fixed to the land, even if those assets are not owned by the landholder – this is pursuant to the Duties Act definition that provides an entity’s landholdings means:

“the entity’s interest in land, and anything fixed to the land that may be separately owned from the land (whether or not the entity has an interest in the thing fixed to the land)”.^[6]

The QRO have confirmed this includes equipment even where it wouldn’t be a “fixture” at common law.^[7]

This can make the valuation exercise considerably more involved than simply obtaining a valuation of the land.

Group structures compound the value

“Landholdings” also picks up land held through subsidiaries and rights that merely “enhance the value” of the entity’s land – for this reason an examination of a full corporate/trust structure map is often needed, to determine the dutiable landholding of the entity in question.^[8]

Value of landholdings is assessed on an unencumbered basis

Mortgages and other encumbrances are disregarded, which means a heavily geared property is still valued at its full unencumbered figure for duty purposes, not net equity.^[9]

A significant interest attracts duty

If an individual holds shares or units that represent a “significant interest” – being an interest of fifty percent (50%) or more in a private company (or ninety percent (90%) or more in a publicly listed company), landholder duty applies.

Related persons compound the individual interest held

Being “related persons” (family members or business partners who each individually hold shares in the entity) changes the unit of measurement QRO uses to decide whether the 50%/90% “significant interest” threshold has been crossed. Related persons’ interests are aggregated even where each individual’s holding is legally separate. Once aggregated, duty is calculated on the combined interest and apportioned across everyone caught up in the aggregation.^[10]

Subtract “excluded interests”

Certain interests are subtracted from the duty calculation as “excluded interests“. An interest is excluded, broadly, if it was held for more than three (3) years before the current acquisition (unless it was acquired as part of a related arrangement), acquired before the entity held any land, or predates 1 July 2011.^[11]

Establishing which category applies requires tracing the acquisition history of every shareholding, not just the current register.

For example, a shareholder who acquired twenty percent (20%) eight (8) years ago and a further ten percent (10%) eight (8) months ago holds two (2) separate interests for this purpose, each assessed on its own acquisition date.

The core calculation, then, looks like this:

Dutiable value = unencumbered value of the Queensland landholdings × (the percentage interest acquired — excluded interests).^[12]

QRO’s website sets out a worked example to illustrate how the calculation works in practice. In that example:

a private company’s Queensland landholdings are valued at $2.8 million;
a person then acquires 60% of the shares in that company;
because that 60% acquisition amounts to a “significant interest” landholder duty is charged on 60% of the landholdings’ value – that is, $1.68 million (60% × $2.8 million);
even though the person only acquired the shares, not the land itself, landholder duty applies to the share acquisition transaction.^[13]

Conclusion

Landholder duty is technically complex, and a QRO assessment can turn into an arduous and expensive process regardless of how modest the duty ultimately owed turns out to be.

In the context of estate planning, getting the share/unit register, related-person arrangements, and fixtures position in order well before death can save beneficiaries significant time and cost down the track.

Key takeaways

Estate planning becomes significantly more complex where a company or unit trust structure holds the assets.
If units or shares are to be gifted in a will expert drafting is required to ensure the intended interest goes to the intended beneficiaries and does so in a tax-efficient manner.
A TDT does not, by itself, secure a beneficiary’s future interest in the underlying asset – what they actually receive depends on both the constitution/trust deed of the underlying entity and the terms of the TDT itself, making this an area where generic drafting creates real risk.

Links and further references

Legislation

Cases

CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98; (2005) 221 ALR 196; (2005) 79 ALJR 1724 (28 September 2005)

Other resources

Queensland Revenue Office, Public Ruling DA167.1.1, Landholder Duty — Land-holdings — Items Fixed to the Land (20 October 2011) — https://qro.qld.gov.au/resource/da167-1/
Queensland Revenue Office, Calculating Landholder Duty (16 October 2024) — https://qro.qld.gov.au/duties/investors/landholder/calculating/
ASX Listing Rules Chapter 9 (9.1–9.19).

Further information

If you need advice on how to deal with assets held by an entity in your testamentary discretionary trust will contact us for a confidential and obligation‑free discussion.

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au

Disclaimer

This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances

[1] Superannuation Industry (Supervision) Act 1993 (Cth), section 59, and Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.17A.

[2] Corporations Act 2001 (Cth), section 135.

[3]ASX Listing Rules Chapter 9 (9.1–9.19).

[4]CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98; (2005) 221 ALR 196; (2005) 79 ALJR 1724 (28 September 2005) at [20].

[5] Duties Act 2001 (Qld), section 165.

[6] Duties Act 2001 (Qld), section 167.

[7] QRO Public Ruling DA167.1.1, example 6.

[8] Duties Act 2001 (Qld), section 182.

[9] Duties Act 2001 (Qld), section 14.

[10] Duties Act 2001 (Qld), section 164 and section 158, also see the QRO website: https://qro.qld.gov.au/duties/investors/landholder/relevant-acquisitions/

[11] Duties Act 2001 (Qld), section 159.

[12] Duties Act 2001 (Qld), section 179.