Take the money and run – interest deductions and succession planning **

Last week, we had cause to revisit a Tax Office ruling that is often overlooked in the context of family and business succession plans.

In particular, we were reviewing the handing on of control of a family trust, where as part of the overall arrangement, the intention was to pay down the credit loans owed by the trust to the parents of the individual taking control.

The trust was intending to use external bank funding in order to finance the pay down of the loans to the parents.

In this particular scenario, the conclusion was reached that the interest on the borrowing expense should be deductible – this conclusion was reached on the basis of Tax Ruling 2005/12.

The ruling is worth reviewing whenever interest deductibility is in issue as there are a number of fairly similar situations where the interest expense would not in fact be deductible, according to the analysis of the Tax Office.

As usual if you would like a copy of the ruling please contact me.

** For the trainspotters, ‘Take the Money and Run’ is a song by The Steve Miller Band from 1976.

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Impact of the Spry decision on trusts

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Impact of the Spry decision on trusts’ at the following link - https://youtu.be/mFkCvyZaqZs

As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –

There is no doubt that immediately following Spry, basically everyone was assuming that the position moving forward would be that no matter how you set up a trust, and no matter if it was a family trust or a testamentary trust, it would never provide any level of asset protection at all. 

However, the reality in relation to Spry is that a lot of the reasons for it having such a radical impact in that particular scenario were really driven by the factual circumstances of the case.

For example, there were allegations, though not proven, neither were they disproven, regarding mismanagement of trust assets, deliberate threats to actually destroy trust property, and deliberate attempts to mislead the judges through the various stages of the court process. 

If you look at Spry in the context of these allegations, in terms of the wider factual scenario, and some of the subsequent cases, it's probably fair to say that you can distinguish a lot of the general trust structuring planning is in this area, away from the decision of Spry itself.

Until next week.

Using discretionary trusts to protect inheritances

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Using discretionary trusts to protect inheritances’ at the following link - https://youtu.be/lkkevmdo4MU

As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –

Historically, the reality has been that no matter if it’s a normal family trust or some form of testamentary trust, there's been a general acceptance that the Family Court could attack the assets of that trust in particular circumstances.

However, if it was structured appropriately, and care was taken in terms of how the trust structure was setup, then the assets of a trust would generally be quarantined.  The concern in recent times has been the decision of Spry, which received a lot of media attention. 

That decision seemed to create the impression, on the face of it, that no matter what form of structure was setup - family trust or testamentary trust - and no matter how that was crafted in terms of the control structure of the arrangement, the assets of the trust would always be completely exposed. So, obviously a decision that created a radical change in terms of the way people approach setting up trust structures.

Until next week.