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Legal tip 31: Trust Resettlements

Discussion in 'Legal Issues' started by Terry_w, 19th Jul, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Trust Resettlements


    Any time a trust deed is changed there is the risk that the change could result in a ‘resettlement’. If a resettlement happens then it is considered a change so great that the nature of the trust is changed so it is a new trust. The would mean a notional transfer of all the assets of the trust has occurred. When a transfer happens it is a Capital Gains Tax event and also a stamp duty event.


    The income tax side is relatively straight forward. As long as the trust deed foresees the possibility of the change happening then generally it won’t be a resettlement for CGT reasons.


    But the stamp duty side is much more complex as each state has different stamp duty laws.


    In NSW for example a change of trustee can be a resettlement if the deed is worded so that the new trustee becomes a beneficiary where they were not a beneficiary before.


    Don’t go changing trust deeds without legal advice.
     
  2. RPI

    RPI Property Lawyer, Town Planner Business Member

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    This can easily lead to very expensive mistakes in QLD. Duty is ruthless if you get it wrong.
     
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  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    What about a change in use of the trust - for eg if you had a barely used trust for a few share investments, then decided to run a business out of it?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This would not cause a resettlement. But the trustee will have to check the deed carefully to make sure a business is able to be run, otherwise a breach of trust.
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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