Discretionary Trust Distribution

Discussion in 'Accounting & Tax' started by thesuperman, 13th May, 2017.

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  1. thesuperman

    thesuperman Well-Known Member

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    I believe a discretionary trust can't really distribute to a SMSF directly but is there a way around this to take advantage of the tax benefits of a SMSF?

    Say you have an investment property in a discretionary trust. I believe a discretionary trust can make a family trust election and distribute to a related entity eg. unit trust. Therefore, if a unit trust was setup with a sole unit holder being the SMSF, could rental income and capital gains down the track when property is sold flow through from from the discretionary trust through the unit trust to SMSF?

    My thinking is based along the lines of how a unit trust can hold investment property and have a SMSF as a unit holder, therefore having a fixed entitlement to the income of the trust.
     
    Last edited: 13th May, 2017
    thesuperman, 13th May, 2017
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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A SMSF could distrbute to a SMSF if it is a beneficiary. But the problem is this would be NALI - non arms length income and taxed at the top rate.

    These unit trust strategies have been thought about and legislated against. see s 275-610 ITAA97
     
    Terry_w, 13th May, 2017
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