The law requires a trust to be wound up or “vested” in natural beneficiaries within a maximum period which in most states is 80 years. In South Australia the perpetuity period has been abolished.

Most discretionary trust deeds provide an internal mechanism to wind up the trust at any time. This varies from trust to trust so one should check the deed.

A trust will terminate:

• when wound up in accordance with the deed;

• when the perpetuity period expires; or

• when there is no fund remaining under the control of the trustee.

See Vesting date.

In the Northern Territory, the law requires a trust to be wound up or "vested" in natural beneficiaries within a maximum period of a life in being plus 21 years or 80 years from the date on which settlement takes effect. The latter period is the default maximum period where a trust is required to be wound up or “vested” if this period is not specified in the trust instrument: s 187 , Law of Property Act 2000 (NT)

Where all of the possible beneficiaries of a trust are of full legal age, they can together direct the trustee to terminate the trust and distribute the fund.

See Rule in Saunders v Vautier.

The following matters should be considered when winding up a trust:

• the procedures prescribed by the trust deed;

• consents that may be required – such as that of the appointor;

• identifying all of the possible beneficiaries for discretionary consideration;

• considering all possible creditors;

• advertising for claimants in order to obtain any statutory releases from liability that may be available;

• considering all possible tax consequences – particularly CGT arising from the sale of any trust assets or from in specie distribution to beneficiaries; and

• choosing the beneficiaries with the best tax situations to receive distributions of streamed capital or income.

See Matters to be considered before winding up.

Where one of the steps to winding up a trust involves the sale of trust property, the trustee may be liable for capital gains tax (CGT). If the trustee is carrying on business, then it may have access to the small business CGT concessions when that business is sold.

CGT issues will also arise where assets are transferred in specie to a beneficiary. The specific CGT events are set out in Subdiv 104-E of the Income Tax assessment Act 1997 (Cth). Particularly consider:

• payment attributable to small business concessions;

• payment to beneficiary in respect of unit or interest in a trust;

• a beneficiary becomes absolutely entitled to a trust asset;

• distribution of a trust asset to end a beneficiary’s income right; and

• distribution of a trust asset to end a beneficiary’s capital interest.

See Capital gains tax.

When a unit trust is wound up the payment to the unitholder is first applied against the cost base of the units. Once this has been reduced to nil any excess is treated as a capital gain.

If the units were acquired as a pre-CGT asset then CGT may still be payable if the value of the post CGT assets is more than 75% of the total trust assets.

See Unit trusts.

In New South Wales stamp duty at ad valorem rates is usually chargeable on trust property transferred to a beneficiary on the winding up of a trust. Concessions are available where a transfer is made under and in conformity with the trusts contained in a declaration of trusts. The conditions set out in the concession must be strictly met.

In Victoria, there are exemptions from duty in circumstances where:

• property passes to beneficiaries of fixed trusts;

• property passes to beneficiaries of discretionary trusts;

• property passes to beneficiaries of unit trusts; and

• property passes, not for valuable consideration, from the legal personal representative of a deceased person to a beneficiary.

In Queensland, stamp duty at ad valorem rates is usually chargeable on trust property transferred to a beneficiary on the winding up of a trust. Concessions are available where a transfer is made under and in conformity with the trusts contained in a declaration of trusts. The conditions set out in the concession must be strictly met.

To obtain the concession stamp duty must have been paid on the transaction that resulted in the property becoming subject to the trust and the beneficiary must have been a beneficiary at that time.

In Western Australia, duty is payable in relation to dutiable transactions, which include, among other things, a transfer of dutiable property, a declaration of trust over dutiable property and a trust acquisition or a trust surrender: ss 11(1)(b) , 11(1)(c) , 11(1)(h) , Duties Act 2008 (WA); ss 53–62 and 63–69 , Duties Act 2008 (WA).

Property passing to beneficiaries of a unit trust scheme is generally not dutiable, unless the ‘landholder’ provisions in Ch 3 of the Duties Act 2008 (WA) are met: s 29 , Duties Act 2008 (WA).

Nominal duty is chargeable in relation to certain transactions involving trusts but the conditions set out in the relevant sections must be met: ss 114–119 , Duties Act 2008 (WA).

In South Australia, there are limited exemptions from duty for transfers to:

• beneficiaries of fixed trusts (where the relevant property was acquired under an instrument on which ad valorem duty has already been paid); and

• beneficiaries under a family discretionary trust.

Each of these exemptions is subject to conditions which must be strictly met.

In Tasmania, there are various concessions from duty where property passes to beneficiaries of trusts and for changes relating to trustees.

In the Northern Territory, there are exemptions from duty for the transfer of property from trustee to beneficiary. Those exemptions are found in Item 6 of Sch 2 of the Stamp Duty Act and apply in the following circumstances:

• property is transferred by the trustee to a beneficiary of a fixed trust; and

• property is transferred by the trustee to a beneficiary of a discretionary trust;

To obtain the exemption:

• the property must be transferred in accordance with the terms of the trust and must not be made for valuable consideration; and

• stamp duty must have been paid on the transaction that resulted in the property becoming subject to the trust, unless duty was not otherwise payable on the transaction, the beneficiary must have been a beneficiary at that time.

In the case of a discretionary trust, there is an additional requirement that the beneficiary must be an individual and must hold the property both legally and beneficially.

A duty of $20 is chargeable on transfers of dutiable property from trustee to beneficiary if there was no consideration and the transfer was made in conformity with the declaration of trust: s 58(1) , Duties Act 1999 (ACT).

See Stamp duty issues.