Legal Tip 314: How a Trust for Shares Might Differ to a Trust for Property

Discussion in 'Legal Issues' started by Terry_w, 15th Oct, 2020.

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  1. Terry_w

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

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    Different trusts will have different terms and generally I will set up trusts for shares differently for trusts to hold real property.


    For a trust that will only hold shares

    - Trustee can be a beneficiary.

    - Foreign persons can be beneficiaries


    For a trust that will hold property

    - The trustee can be a beneficiary, but subsequent trustees should be excluded from being beneficiaries if the trust will hold NSW property

    - Foreign Persons should be excluded from many trusts to avoid stamp duty and Land Tax issues


    For a trust that will hold both?

    Best to have 2 separate trusts, but if you must have one trust that holds both you would need to have the deed drafted for a trust that will hold property as above, or potentially suffer excess stamp duty and land tax.
     
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  2. Gen-Y

    Gen-Y Well-Known Member

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    Another gem advice from Terry. :)
     
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  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    One specific issue for a trust that holds the likes of shares ETFs etc is tax credits. The family trust election requirements may force a FTE to be made. This may be best avoided for a trust that owns property. Matters which can affect a family trust election can include a later death of the test individual and remarriage of the surviving spouse etc

    Another key reason can include when a trust beneficiary is non-resident. CGT issues on real property are different to CGT issues for non-property. eg lost discount, excluded gains etc