Hi,
I was wondering if someone can help.
Have setup a company A ATF trust T
The trust holds a few commercial properties and we are getting flogged with land tax.
Is there any way to trasfer the properties to a mirror trust M
without any capital gain, if trust M had exactly the same structure??Are there any alternative solutions without having to sell the properties?
THANKS !!
This is called cloning or trust splitting.
It used to be possible, but then the ATO abolished the general CGT exemption. Though it may still be possible in some circumstances.
see TR 2006/4
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20064/NAT/ATO/00001And http://www.ato.gov.au/taxprofessionals/content.asp?doc=/Content/00109677.htm
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
and http://www.ato.gov.au/corporate/content.asp?doc=/content/00137188.htm
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry,
Thanks mate. I have gone through the documents. I am assuming even if the trusts are exact mirror images of each other, i.e same beneficiaries and appointor, the properties cannot be transferred without any cgt?do you know any good advisor who will be able to help? at the momment the land component of the properties is so big, i am having to pay 30k pa in land tax. cheers
try brett davies lawyers http://www.taxlawyer.com.au or via lawcentral.com.au as they have written on this topic in their newsletters from time to time – you should be able to find back issues on law central too.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry's right, trust cloning no longer exempts the transfer of an asset for CGT purposes.
Trust splitting can be done transfer an asset without triggering CGT or stamp duty. If you are wanting to investigate this further, best to take your trust deed to a tax lawyer and have them set up the new trust.
Although after seeing the tax lawyers fees, it may be cheaper just to pay the CGT!
Hi Dan
Whats the diff between splitting and cloning?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
@dan, thanks mate. so trust splitting would be the way to go huh.
i thinks its better to pay the lawyers once then pay huge land tax every year.
Thanks for the heads up. If ure from WA and know any good lawyers for trust splitting, let us know
cheers
Are the comm properties, retail and subject to retail tenancy laws? If they are office/professional or sheds/industrial, ideally your tennants should be paying…..at least on a single holdings basis….check your leases if htis is the asset class you are in.
Obviously will depend upon what structure the lease wording is at present, however maybe an idea for future negotiations on subsequent letting(s).
For now, I guess it is a matter of the cost of our business to pay this impost that benefits no one except the state revenue offices. It was, in days gone by, a wealth tax levied upon hoarders of subdividable city land to allow metropolitan (or regional) land releases to benefit the growing population base.
Now it fills the state coffers. Wouldn't be so bad if it were not a cumulative punishment. On a single holdings basis it is far more acceptable. It has made me look beyond Vic and have holdings in Qld and Sydney.
Good luck….my rant is over.
btw, Brett Davies lawyers are in Perth
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry,
Thank mate. I will check them out. What finance company do you work for?
If it worked well we could look at using you to secure finance for the future.
Let me know.. thanks..Michael,
Yes mate . All commercial warehouses.
The land tax is crazy. Our accountants were not alert and did not advice correctly, so we ended up acquiring a lot of land in one entity.Nothing in the lease states the tenant will cop the land tax, but you are right,not a bad idea for future leases.
Thanks
Terryw wrote:Hi DanWhats the diff between splitting and cloning?
Hi Terry,
Trust cloning is where a new trust is formed, which has the same trustee, beneficiaries and terms as the original trust. It is a 'clone' of the first trust. There used to be a trust cloning exemption, allowing for the transfer of assets from the original trust to the cloned trust free of CGT. This exemption has since been removed. (Probably because it was proving very popular)
Trust splitting is splitting the assets in a trust, and having a new trustee appointed over separate assets. ie, Trust A holds two properties. Trust B is set up, with Co B as trustee to hold property B. Both trusts still operate under the one trust deed, so there is no re-settlement.
It's not as flexible as trust cloning, but still an option where the owners want to transfer an asset out of a trust, without triggering CGT or stamp duty.
rush80 wrote:Michael,Yes mate . All commercial warehouses.
The land tax is crazy. Our accountants were not alert and did not advice correctly, so we ended up acquiring a lot of land in one entity.Nothing in the lease states the tenant will cop the land tax, but you are right,not a bad idea for future leases.
Thanks
Hi ya Rush
That's what would attract me to sheds in particular or offices…………triple net leases. I own enough resi. Multi's appeal as in blocks of units where I have more control. I do own one retail commercial and whilst it has served me well (it is in a brand name street/strip) and purchased 20 years ago, however in my current frame of mind, that is merely glorified residential. I have to pay land tax there also.
Good luck…….if you can segregate these assets (divest them out into separate trusts/entities) and as you mentioned, next time land tax should be in the lease for the tenant to pay.
Have a good one.
Cheers ~M.
Thanks Dan
That is interesting, one trust with 2 separate trustees – which is essentially 2 trusts.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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