Where you use your main residence for income producing purposes and have claimed a portion of rates, interest, etc. you will be entitled to a partial CGT exemption.

CGT is calculated by total CGT multiplied by percentage of floor area not used as main residence multiplied by percentage of period of ownership, where that part of the home was not…[Read more]

The problem with claiming that asset protection is the main reason for restructuring or structuring could lead to a lawyer arguing in court that the only reason you did so was to defeat the creditors and therefore the structure would be ineffective as the courts could apply the claw-back provisions. The 2 year limit would no longer apply. Asset…[Read more]

Actually to make both the ATO and bankruptcy courts happy you should be saying number 1 Estate and Retirement Planning

Another good reason why assets should never be purchased by individuals, except for the main residence.

Ive been advised by tax lawyers that the word asset protection should be used in conjunction with the word ESTATE PLANNING. Why ?

Because if the reason you transfer your assets into a trust is to protect them then the question might be to protect them from whom. Creditors ? Well then the bankruptcy laws of 24 months do not apply where the sole…[Read more]

The real question should be why should you never hold appreciating tangible assets in a company. The main reason is that companies are not eligible for the 50% CGT discount. This is an enormous loss of tax savings by purchasing appreciating assets through a company.

There are various strategies if one does want to operate the business itself…[Read more]

Contributed Capital to a non fixed trust includes amounts settled on or contributed to the trust.

To the extent that the distribution exceeds the the amount of available profits the distribution is treated as being a return of contributed capital.

A return of contributed capital is treated under the capital gains tax rules. The amount of…[Read more]

Cata,

In this instance you are technically incorrect. Greatpig is correct. Under Div6AA of Part III of the ITAA “unearned” taxable income of a minor for 2004/05 will be taxed as follows:

– $0 – $416 taxed as normal (if no other income, then tax is NIL)
– between $416 and $1,446 greater of (1) 66% of excess over $416 and (2) the difference…[Read more]

Cata,

Don’t disagree that strategies can be developed for protecting your family home, etc through the use of a discretionary trust, without the stamp duty and CGT implications. Agreed that these strategies are best discussed with an advisor and not in the forum and is why I didnt want to make any comment on them.

Would be interested to hear…[Read more]

GreatPig,

Capital losses are treated differently to revenue losses. The trust loss provisions do not relate to capital losses. These capital losses should be able to be carried forward and offset against any future capital gains made by the trust. The capital losses can not however be distributed to the beneficiaries to be offset against any…[Read more]

Cata,

Asset protection is not the only reason that people are using hybrid discretionary trusts. Unless a trust can issue special income units (neither a unit trust or discretionary trust can) then how can you negative gear through these entities. Most of my clients have hybrid discretionary trusts to obtain the asset protection benefits of a…[Read more]

Blue,

TerryW has given a pretty good breakdown of how the hybrid trust operates. You also need to be sure

1. The trust deeds are in place before the exchange of contracts;
2. Appropriate resolutions will need to be made with respect to the issue of special income units, purchase of the property, etc.

Income will need to be distributed to the…[Read more]

Terry,

I agree the information available on lawcentral in particular is fantastic. Sorry if it came across that you shouldnt refer people to these sites..lol..didnt intend that. I think it is great that you are giving people the power to increase their knowledge.

I just know that LawCentral and ClearDocs does not allow you to establish a…[Read more]

Be very careful. For $137 I would think that what you are purchasing is a discretionary trust. If you want to obtain the benefits of negative gearing, ability to refinance and convert non deductible debt to deductible debt, ability to transfer property to another trust without incurring stamp duty, transfer the property to your super fund at a…[Read more]

Jon,

A seperate structure for undertaking developments were the income will be treated as revenue rather than capital is wise.

However a trust will provide a higher degree of flexibility with respect to distributions. Although the company will pay a tax rate of 30% on profits it may be possible to in fact pay a much lower rate by using a trust.…[Read more]

Jon,

A seperate structure for undertaking developments were the income will be treated as revenue rather than capital is wise.

However a trust will provide a higher degree of flexibility with respect to distributions. Although the company will pay a tax rate of 30% on profits it may be possible to in fact pay a much lower rate by using a trust.…[Read more]

Terry,

I am located on the NSW Central Coast so more than willing to assist those up this way. I usually refer people from the Sydney region to Nick at Strategic Wealth Management as I understand that a lot of people like to make face-to-face contact and Nick is well placed in Bligh Street. I also work in conjunction with Chris Batten and he…[Read more]

Nick from Strategic Wealth Management is based in Bligh Street Sydney. I know that he deals with Chris Batten from Macquarie Group Services who is probably one of the most knowledgable individuals with respect to structuring.

Ive also heard good things re Edward Chan from Chan & Naylor but not sure who he deals with in respect to trusts.

Either…[Read more]

Jeff,

Thanks for that. Sometimes it is easy to forget that we have other forumites from NZ. My comments purely relate to Australia and the tax regime here so thanks for providing some valuable insight into the NZ environment. I plead total ignorance on NZ tax law so it is always good to be learning something new.

If you are conducting a “business” then a trust will still be eligible for any or all of the small business CGT concessions ie. the active asset exemption, small business rollover provisions and retirement exemptions. However certain tests in all cases must be applied to obtain these concessions (even for companies) and if the assets are held in…[Read more]