Australian tax law forced trustees of an Auckland family trust to get court approval extending life of their trust to avoid imminent sale of a Gold Coast apartment.
Chatsworth Trust was established by businessman Garry Melville-Smith in 1983. Family members are beneficiaries.
The High Court was told this Trust has a 2028 expiry date. Its only remaining asset is shares in a company owning the Gold Coast apartment.
Family members use this apartment for holidays. They want to have it continue as a trust asset beyond 2028. Effect of the Trust’s fixed expiry date will be to force a transfer of the apartment to a new family trust, triggering an Australian tax liability.
Using Trust Act powers, Justice Tahana approved a new expiry date calculated as 125 years from the Trust’s creation in 1983, enabling the Trust to run on beyond its current expiry date, deferring any potential tax liability arising on sale.
Trusts Act 2019 now permits family trusts to exist for up to 125 years, amending previous rules known to lawyers as rules ‘against perpetuities,’ which prohibit non-charitable trusts from running on forever.
In addition, Justice Tahana approved changes to the Chatsworth Trust deed removing spouses of family members as potential beneficiaries.
Having spouses listed as beneficiaries increases the risk of Trust assets being subject to relationship property disputes, she said.
re Chatsworth Trust – High Court (24.06.26)
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