Family Trust, Bucket Company & its shareholder Qn

Discussion in 'Accounting, Tax & Legal' started by Rhjcooper, 28th Jul, 2018.

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  1. Rhjcooper

    Rhjcooper New Member

    27th Jul, 2018
    If i have a DFT with a bucket company beneficiary with capital growth shares in the DFT and distributions to the bucket company acquiring income shares and keeping income in the bucket company (i.e. LIC with fully franked dividends going to DRP, allowing a 10-20yr set forget investment)....what comments do you have on the following:

    1. If initially the shareholders of the bucket company are 2x individuals, can i sell the shares in the bucket company in 20yrs time to a second DFT set up at that point in time? If so can this be for $1 each (vs the NPV of the bucket company) to avoid CGT? (Figuring out if i need to set up the second DFT now or if i can postpone till later)
    2. If the bucket company then pays dividend to the shareholder (shareholder =2nd DFT) based on dividend from bucket company investments there is no CGT liability right?
    3. Franking rate of dividend paid to bucket company transfers directly as the franking rate on the dividend the bucket company pays its shareholder (2nd DFT) which then transfers directly to beneficiaries, right?
    4. If the objective is to get wealth out of the bucket company by selling its assets, incurring CGT, then providing dividend to individual share holders (2nd DFT) and then distributing to beneficiaries this gets the 50% CGT discount, right?
    5. What happens if the bucket company share holder is a SMSF (a) in accumulation phase and (b) in pension phase for (i) fully franked dividends and (ii) capital gains? Is this the same if the SMSF is a beneficiary of the 2nd DFT which is the shareholder of the bucket company?
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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

    9th Jun, 2006
    Australia wide
    1. yes
    yes, but taxed at market value which will trigger CGT
    2. payments of dividends don't attract CGT
    3. yes
    4. no
    5. nali
    2 people like this.