All Topics / Legal & Accounting / Family trust tax minimisation.

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  • Profile photo of ptnptn
    Participant
    @ptn
    Join Date: 2006
    Post Count: 74

    Hi all,

    A friend came to me with a challenge. How to distribute $1M from his family trusts and minimise tax.

    He bought a IP in 2005 in his trusts and sold it recently. After all expenses, he has a balance of $1m in his trust which he wish to distribute over a period of time.

    Possible scenario
    1. Wife $100k, Husband $100k, leave $800k in trusts and pay 30% tax.
    2. Wife $100k, Husband $100k, buy $800k worth of shares. Sell $200k worth of shares per year to distribute to husband and wife.

    Wonder if you could distribute only the 50% CG tax exemption part only?

    Any recommendations ?

    Thanks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Is it income or capital? or a bit of both.

    Trustee will pay 47% on income retained in trust. Companies are taxed at 30%.

    Buying $800k worth of shares is a capital expenses and not deductible so this won’t wipe out tax debt.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of ptnptn
    Participant
    @ptn
    Join Date: 2006
    Post Count: 74

    Hi Terry,

    The $1M is capital gain.

    How would you distribute it to maintain minimum individual tax? Family Trustee are husband, wife and 2 kids under 16 yo.

    Very interested in your response.

    Thanks

    regards
    ptn

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hard to say without knowing any details. Assuming they all beneficiaries worst case may be just under 25% tax. They should all sit down with their tax advisor and work it out – well in advance of 30 June

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

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