|
|
Trusts- Avoid capital gains tax when you transfer assets |
Can you avoid paying capital gains tax if you decide to set up a second discretionary family trust for your children in order to transfer assets? |
John and Mary set up a standard discretionary trust to invest in the share market with themselves as trustees. John was the appointor and they, their two daughters and their grandchildren the primary beneficiaries. |
After very successful share trading, John and Mary had about $2 million worth of shares in the trust, with an unrealised capital gain of $400,000. Their aim was to split the shares into two bundles, one for each of their daughters. |
They decided to establish a new family discretionary trust and transfer half the shares into it, making their elder daughter the sole trustee. Apart from the standard $200 duty to establish the new trust, this can be done free of tax and stamp duty. |
However, in order to gain the capital gains tax concession, "the beneficiaries and terms of both trusts" must be the same - that is, all the provisions of the trust, including the vesting date and the beneficiaries, must be the same as the initial trust. |
To obtain the capital gains tax concession, the appointors of the old and new trust must be the same. |
So John needs to be the appointor of the new trust. If the daughter for whose future benefit the trust is intended were made the appointor of the trust, capital gains tax would be payable on the shares transferred. |
