Creating a Discretionary Trust

Hi SML and All
Just a re-cap on the trading co and new DT.
First you appear to have begun trading in the current tax year ? If yes you can change now, BUT
First
it's not good to use an old company on a new trust as it might have attracted some financial dirt along the way a full service company wher you just place an order costs about $650 ($412 for the Govt Fee) so its cheap once off insurance,
2. There wont be any CGT because its all happend in < 12 months AND you did not commence with view to make the changes it just evolved. – CGT needs 2 elements,  Intention to make a gain and 2. > 12 months and 1 day duration,
Now theres not much point in trying to split $20K as the tax  rates wont make much differenece unless all the recipients,
either company shareholders or trust beneficiaries are on the top tax rate.
If its going to be worth doing do it right the first time by PLANNING what you do and then deciding HOW.
There are 4 D's in Tax Planning:
1. Deduct,
2. Divide (Income Split)
3. Defer (Pay later)
4. Discount (Dollar costs eroded by inflation or alternativly increased by investment/gain until payment is made)
A Good Plan uses them all together
You wont need 2 tax returns as you could get the activty moved to the trust, get a new ABN, GST, TFN for the trust and
Cancel all the old stuff.
You may ned to put in 2 returns for the first year depending on your results.
Happy Planning All
Anthony K

Hi Rob and All
Thanks for your contrary view, please substantiate ASAP,
Regards
Anthony

Hi SML and All
Definately no backdating . . .  ever,
Unless your are the PM or Treasurer or some other Pollie we cant re-invent the past
You must transition your affairs with complete transparency else you may find that it will cost you in the future.
I am waiting for RobG to come back as I am interested in his information, but
remember when and if you are subject to a CGT Event you do have offsets to reduce liabilities, my guess would be that your cost base calculations and your 50% personal discount will make any possible CGT pretty damn close to zero in a "few months" old business. Thats based on my 32 years in tax/business planning, although I have been wrong once before in 1982

Regards To All (even including RobG !)

It looks like we are dealing with the transfer of a business which was previously run by a company to the same company in its capacity as trustee.

A business would be a CGT asset and disposal of a CGT would trigger CGT – it would be CGT event A1 I presume. The 50% CGT discount may be available if the business was held by the company for more than 12 months. If not, then the full CG would be taxed. See s104-10 of the ITAA 1997 for the legislation concerning this.
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s104.10.html

Note s104-10(2) where disposal is defined as changing ownership from one entity to another.

A trust is considered an entity under the definition at s960-100:
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s960.100.html

Even though there may be no change in legal ownership (it is still the company owning the business), there is a change in beneficial ownership and this triggers the CGT event. See:

ATO ID 2010/72
Income Tax Capital gains tax: trustee ceasing to hold an asset on trust and commencing to hold it in its own capacity – CGT event A1
http://law.ato.gov.au/atolaw/view.htm?docid=%22AID%2FAID201072%2F00001%22
(which is the reverse, but the principles still would be the same).

Despite all this, no tax may be payable if the value of the business is still low.

Hi All
This is starting to look like Shakespears play – Much Ado About Nothing,
Facts:
You have traded as a company for "several months", your CGT assets (Goodwill + Business assets less stock is worth what ? Minus establsihment costs etecetara ad commissions on sale ?) This is a business Non Event guys.
You could'nt get $ 100 bucks for this shebang on the open market  – people would laugh at you
I live in the real world – private family companies rarely have any market value – thats the truth,
I have had lots of clients over 30 years, how many sold their businesses for real money ? very few.
Most people who want to sell a business have a single motivation – its a failure or failing,
Please guys this is not what I believe this site is designed to deliver <moderator: delete language>.
But I still love you all
Anthony