Tuesday, December 6, 2016

Trust Cloning

A recent post focused on trust splitting as a useful tool to improve the administration and management of a discretionary trust http://blog.viewlegal.com.au/2016/03/trust-splitting-some-clarity-at-last.html

As has been widely publicised, trust cloning for family trusts was effectively abolished on 31 October 2008. Since 1 July 2016 trust cloning has been available for trusts that run businesses with an annual turn over of less than $10M – see http://blog.viewlegal.com.au/2016/04/tantalising-opportunities-for-trust.html (the $2M turnover test referred to there is intended to be $10M).

Interestingly, there are still situations when trust cloning might in fact be available, despite the tax concessions being removed on 31 October 2008.

Broadly, the main situations where we see trust cloning being used still are:
  1. Where there is no capital gain in relation to the assets to be transferred;
  2. Where the capital gains tax that would otherwise be triggered on the trust clone can be rolled over (for example, using the various types of small business CGT concessions or between testamentary trusts); and
  3. Where the trust cloning falls within the CGT exemption available for unit trusts.
Generally, there will be stamp duty payable in relation to a trust cloning arrangement to the extent there is dutiable property, although there are areas where there may be a duty exemption, including –
  1. In South Australia, for most transfers;
  2. In Queensland, for all transfers;
  3. In NSW, for business assets and land rich companies; and
  4. In Victoria, for business assets.
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