Many years ago, our business implemented what we refer to as the 'four- eye' process.
Essentially, this control process is designed to ensure that at least two people review every piece of correspondence or work performed, even in what would otherwise be considered to be a 'simple' situation.
In more complex scenarios, we often have a six or even eight-eye review process which can often involve a peer review of certain technical issues by lawyers who might in fact specialise in other areas.
While our four-eye process does not eliminate all mistakes, it certainly provides an excellent safety mechanism in the vast majority of cases.
It also aligns with one of our key mantras – measure twice; cut once.
Many mantras we live by at View are profiled in my business book 'Laws for Life'.
A link to your (free!) copy of this book is below -
One of key goals at View is ensuring that we have ‘written the book’ for every aspect of the law we specialise in.
Following the successful launch of books in estate planning, tax, trusts, entity structuring, testamentary trusts, SMSFs and business succession, we have now developed and launched another book – 40 Forms of Trusts – workbook.
The concept of a trust is in theory relatively simple – one party (the trustee) holds assets for the benefit of others (the beneficiaries).
Counterintuitively, the relative simplicity of there being only a few core elements has meant there are almost a limitless number of forms of trusts.
Indeed, over time advisers and clients alike have largely only been limited by their imagination in terms of the way in which they craft any particular trust deed.
The workbook practically explores 40 different trust structures, including:
The increasingly popular ‘GST’ structure
All key forms of protective trusts
Secret trusts
International structures
Perpetuity trusts
Legitimate tax advantaged trusts
The workbook also has a number of key checklists for use when establishing a new trust or reviewing an existing trust.
Everyone who likes or shares this post will go into the draw to win a free copy of this book.
** for the trainspotters, ‘The New Matthew’ is a song by BrisVegas band Custard, watch hear (sic) – the video was in fact not the winner of the best video award at the ARIAs back in 1999 (despite the revolving ‘ARIA’ at the bottom of the screen … instead they had won it for ‘Girls like that’) -
Indeed, at last count, we had over 2 million words of published technical content. Our goal to ‘write the textbook' in each core specialisation has been achieved with books published in:
estate planning;
trusts;
taxation of trusts;
testamentary trusts;
SMSFs;
structuring; and
asset protection.
The majority of our books are independently published. This means that we retain complete control over every aspect of the publishing process and it provides us with significant flexibility to share our content with advisers.
When combined with our ‘why’, which most succinctly is simply ‘for friends', it creates interesting opportunities – hence the title here referring to the ability to publish your own book within 48 seconds, as opposed to taking 48 weeks, 48 days or even 48 hours.
For us, being for friends, means that all of our published content is able to be utilised by advisers however they feel may be valuable.
For example, in relation to our weekly blog posts, advisers can use this content as often as is relevant and, as long as an adviser checks with us, it can generally be entirely rebranded as an adviser sees fit.
More recently, we have helped advisers instantly create their own books using one of three broad approaches. Each approach simply takes one of our previously published books as the base content and then we either:
Design the cover and branding specifically for the relevant adviser. The adviser creates a foreword (and indeed any other content the adviser wishes to contribute) - and our publishing team is able to help with any, or all, aspects of this process.
The next alternative retains the existing cover design and branding, however the adviser creates the foreword and any other content they wish to include for a ‘special print run’.
The final approach retains the relevant existing book ‘as is’, however a specially designed bookmark promoting the adviser is created for the adviser to hand out with every copy of the book. There is a significant amount of flexibility in relation to the ‘bookmark’ it can be a traditional bookmark, a postcard, trifold flyer or even a dust jacket.
Regardless of which approach is adopted, our experience is that within around 48 seconds, an adviser can make a decision that best suits their objectives and have access to what we believe is the new standard in a ‘business card’ being one that cannot be easily thrown away.
The vast majority of rollovers available under the Tax Act relate to transactions between companies.
There is however a series of transactions that effectively allows one form of structure to be converted into another.
Following last week’s post, I was reminded of one of the very few rollovers that allows the iteration from one legal structure to another. In particular, the tax rollover available for a discretionary trust that allows a trust to transfer all of its assets into a company, so long as the shares in the company are owned by that same discretionary trust. This form of rollover is available under Subdivision 122A of the 1997 Tax Act.
Obviously, there are stamp duty considerations in many states still that often need to be taken into account, however the rollover can be a very useful one in a wide range of circumstances to ensure no tax is triggered.
We have particularly seen it used proactively as part of a succession plan – it is often seen as easier to facilitate the transfer of shares in a company, as opposed to managing the control of a discretionary trust.
For a myriad of structuring issues, one issue that appears to be raised more regularly is whether it is possible to convert a family discretionary trust into a fixed trust.
This issue was considered by the Tax Office in Private Ruling Authorisation Number: 1012991136582. As usual, if you would like a copy of the ruling please let me know.
Broadly the factual matrix was as follows -
a 'standard' family trust held an asset;
the trust had a widely crafted power of variation;
the trustee resolved to make a capital distribution of the balance in the unrealised capital profits account to certain beneficiaries, with this amount left unpaid (ie meaning it was a debt owed by the trust to the beneficiaries);
by agreement there was then a conversion of the debts (and some other outstanding loans) to equity such that each of the relevant beneficiaries had a certain percentage of ‘equity’ in the trust;
relying on the power to vary, the trustee then amended the terms of the trust deed to convert it into a fixed unit trust.
After analysing the provisions of its Tax Determination in relation to resettlements (namely TD2012/21, see our previous post that explores this - ATO releases draft determination on trust resettlements) the Tax Office confirms that so long as the amendments are within the powers of the trust deed, the continuity of the trust will be maintained for trust law purposes.
This is because the ultimate beneficiaries of the trust after the proposed amendments would be the individuals who were the objects of the trust before the variation. The fact that the extent of the interests of the beneficiaries in the trust change as a result of the variation was seen as irrelevant.
Therefore, the amendments to the terms of the trust did not trigger capital gains tax (CGT) event E1 or CGT event E2, being the 'resettlement' CGT events.
CGT event E1 happens if a trust is created over a CGT asset by declaration or settlement.
CGT event E2 happens if a CGT asset is transferred to an existing trust.
The Tax Office further confirmed that CGT event E5 was not triggered by the conversion of a family trust to a fixed trust.
CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust as against the trustee despite any legal disability of the beneficiary.
CGT event E5 does not however happen if the trust is a unit trust and thus this exemption was held to apply here.
The Tax Office also confirmed that there are no other CGT events that happened when the family trust was converted into a unit trust. This is because the amendments were within the trustee's powers contained in the trust instrument. This means that the continuity of the trust was maintained for trust law purposes.
The above post is based on an article originally published in the Weekly Tax Bulletin. Turning comments into wine and books
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All those who interact with the post this week with any comments or likes on LinkedIn will go into the draw to win a bottle of View wine (which we are excited to confirm is now drinkable) or a paperback copy of our workbook ‘40 Forms of Trusts’.
