Benefits of Trust for Non Resident

Hi,

Currently an Aussie living overseas (UK), so non-resident for Australia tax purposes for a few years. I have an investment property rented in WA held in a family trust (profit). No other income in Australia.

I'm going to be buying another property in another family trust (can't use existing family trust for family reasons) which will likely result in moderate loss.

As the family trusts are also non-resident (I'm the sole trustee), I understand that family trust A (with the profit) cannot distribute to family trust B (with the loss), as the ATO collects tax on the profit from trust A as a first and final tax, thereby I cannot utilise the losses in trust B.

I've looked into a few solutions like getting an Australian corporate trustee but that requires a director to be a resident director which costs a lot (and I have no family that can act as resident director).

I know as a non-resident, I lose the CGT discount and negative gearing is pointless for me, so no benefit of buying in my own name. Plus I like the concept of the trust (asset protection/flexibility etc).

Hence, I'd like to buy in a family trust but if I can't utilise the loss, it makes it hard to justify. Does anyone have any other ideas?

 

Disregarding the non-residency status of a director, to me it is concerning that the potential insertion of a corporate trustee (opposed to an individual one) seems expensive to you, when the transaction at hand is the purchase real estate...

I believe you should PAY for the advice of a solicitor or accountant and work with them in creating the right structure and strategy. As it also seems distributions need to be clarified with you.

Also, the existing family trust should be looked into, there are some inherent risks or complications in having non spousal & children beneficiaries (ie adult siblings with their own families etc).

Seek advice is my advice on this

 

You are basically trying to get access to the the 50% CGT discount while being a non-resident. If you had someone here willing to act as director and give a guarantee it would be relatively easy, but as you don't there is probably not that much that can be done.

Either the company would breach the corporations act by not having a resident director or the trustee would be a non-resident and have its central control and management overseas.

 

You said negative gearing is pointless for me, so no benefit of buying in my own name....Agree same issue for trusts. If acquired in your own name one benefit can be accumulated losses which will benefit if you come back OR offset any taxable CGT on any AU assets if you sell any. Accum losses in a trust would be a waste as unless THAT property is sold the loss goes unused.

 

Thanks for the response but I'm not trying (or care) about gaining access of the 50% CGT discount. I want to find a way of having two non-resident family trusts (one profitable and one loss making) and have the ability to distribute profits to the loss-making family trust.

 

Does there only need to be one resident director of a company (if one is non-resident) & one resident trustee of a trust (if one is non-resident) to fulfil these requirements?

 

A company needs at least one resident director.

A trustee is a single position which two or more person's may hold. So I am not sure where you would draw the line but if the central control and management are overseas then it may be a foreign trust even if one trustee is here.

 

Are you sure it is worth to set up a trust just for one property?

 

Income injection tests apply to loss trusts generally, not just non-residents.

Discretionary trusts have a range of extra integrity provisions to prevent transfer of tax benefits (e.g. by diverting income to a loss trust) unless they satisfy certain conditions.