Tuesday, March 26, 2024

When tax savings inspire courts to decide: Let's Groove** with a proposed trust variation

View Legal blog - When tax savings inspire courts to decide: Let's Groove** with a proposed trust variation by Matthew Burgess

Posts over recent weeks have considered various issues about courts varying a trust deed that has no sufficient power of variation.

One of the cases mentioned was the decision in Cecil Investments Pty limited [2021] NSWSC 211.

This decision (as well as TNB 878 Pty Limited – Brunskill Family Trust [2022] NSWSC 527) is also useful as it confirms that there have been a number of cases where it is has been held tax savings or advantages form a basis of expediency in the management and administration of trust property - one of the key tests that generally need to be satisfied.

In particular the decision lists the following examples:
  1. Re A.S. Skyes and the Trustee Act (1974) 1 NSWLR 597: “… the powers conferred on the Court should not be withheld merely because their exercise is sought to enable the avoidance of a revenue impost…”
  2. Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004: “As well, the minimisation of the capital gains tax and stamp duty on the trust property provides a separate basis upon which the conferring of the power is expedient.”
  3. Application of NSFT Pty Ltd [2010] NSWSC 380: “modernisation of the trust deed ... with consequential tax benefits, is expedient in the management or administration of the property vested in the trustee…”
  4. Barry v Borlas Pty Ltd [2012] NSWSC 831: the scope of the court's powers includes preserving trust property and making it financially productive “…which included planning to minimise the impact of tax and duty on the trust property…”
  5. Soo v Soo [2016] NSWSC 1666: "… there are numerous decisions of this Court to the effect that the tax effective administration of a trust is a matter to which regard may properly be had in considering whether or not to exercise discretion".
The above summary largely reflects the conclusions in Kearns v Hill (1990) 21 NSWLR 107, another case featured in other View posts.

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** For the trainspotters, the title of today's post is riffed from the Earth, Wind and Fire song 'Let's Groove’.

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