Main Residence CGT Exemption - Trust

Hi Guys,

Don't shoot me on this topic, I just did 1 hour + of reading on previous posts and only found contradictory information.

This accounting mob in QLD is advising they can setup a trust for asset protection and you still get main residence CGT exemption if you sell later.

Is this a QLD specific thing? Can we get it in VIC? Foresee any issues they are not mentioning? (I got to assume Land Tax still charged as a trust, may not be able to debt recycle?)

All previous accountants, lawyers, forum posts have all said can't get your cake and eat it too. Either put in trust and get taxed later, or put under your name and be exposed to people suing you.

P.S. I will be calling them tomorrow and will provide update.

https://marshtincknell.com.au/fact-sheets/main-residence-trust-long-term-lease/#:~:text=A%20Main%20Residence%20Trust%20is,the%20CGT%20Main%20Residence%20Exemption.&text=If%20the%20property%20is%20sold,CGT%20exemption%20can%20be%20applied

 

CGT is commonwealth tax so it doesn't change where you buy, it is the same all over the place.

CGT is based on an ownership interest, which is not necessarily a legal interest. So you could get the main residence exemption where the title is held in the name of a company. It could also be available where a property is held by the trustee of a discretionary trust where the individual is a right to reside. But beware as there would then be 2 separate ownership interest each with CGT consequences and the granting of a life interest is a CGT event in itself.

So I wouldn't do this without getting a private binding ruling covering all CGT events.

 

How does estate planning work here?
Do you really need asset protection? if an employee with passive investments, shares, insured property, etc how much risk is there to need asset protection?

 

Very little. (About as much risk as the AZ vaccine poses to the general community. )

 

Development company. Haven't cleared up the extent of protection I needed cause I always thought can't put main home in trust.

 

How long you reckon a private ruling will take. If they already have one for someone else can that also be used for me

 

You can't rely on it, but could use it as a guide. Do you know the number of the ruling?

A new ruling is supposed to take 28 days to get a response on, but it is more likely to be 2 months

If you want asset protection you need legal advice too. Having a home owned by a 'trust' doesn't necessarily mean asset protection.

 

Depends how it is set up. Any life interest or right to reside would disappear at death and the succession of control of the trust is the important part. Any assets held on the trust won't pass via anyone's will.

 

And see this
Tax Tip 268: The Main Residence CGT Exemption on a Property Held in Trust? Tax Tip 268: The Main Residence CGT Exemption on a Property Held in Trust?

 

so if the asset is not considered the deceased’s asset, would it also follow that, if sold after the person dies, the cost base would be purchase price (ie as if it was ip all along) plus third element costs?

Would another option be putting the ppor in the partner’s name and making sure the partner is not a director in the business company?

 

I would be asking the accounting firm for their legal advice that supports their view and then ask - does this legal advice apply to you ? (No). Then you would expect they would address a binding private ruling to give support to their view....what will all that cost ? Accountants cant give advice on asset protection or the application of a trust to access the MRE as both would be considered legal advice and.... accountants are legally barred from providing legal services.

And the land tax impact cant be ignored. Especially in NSW !! Trusts get $0 t/hold - I will ignore issue of fixed trusts for this post purpose. . Multiply unimproved land value x 1.6% to determine the cost for this. Annually.

 

This might help a bit, but is attackable

Legal Tip 22: Buying a property in the name of 1 spouse for asset protection reasons https://propertychat.com.au/community/threads/legal-tip-22-buying-a-property-in-the-name-of-1-spouse-for-asset-protection-reasons.1221/

 

That QLD company just got back to me they use a lawyer firm to setup the agreement and they manage the maintenance.

They've confirmed it's properly protected in the trust and it's not just a smokescreen to hide ownership like a bare trust.

They setup some lease agreement that allows the tax exemption and maintains asset protection since inside the trust.

Any thoughts on this, gonna be using it unless someone can help poke holes in it

 

A lease doesnt allow a main residence exemption. A lease addresses the rental. And if the trust has any element of being non fixed it will fail to obtain any main residence exemptions. The more certain that it meets the main residence exemption the more its a scheme.

I would be asking for the promoter to provide me with a binding private ruling issued to you if its so certain. If they are a property firm ...run away. They shouldnt be discussing tax and asset protection ...at all. AP inst quite what many think.

That accounting firm is skating on thin ice. This webpage seems like promotion of legal services. It could even have a Grubby trust associated with it with dubious claims to asset protect assets and create bullshptt equitable claims. A disc trust cannot claim a main residence exemption.

 

How on earth could an accountant confirm this? Not even a lawyer could.

 

That's what they said the service they offer is in partnership with a lawyer in QLD. Going to discuss further with their lawyer. Might pay for another lawyer to talk to them if they sound 'right' to just double check and confirm.

 

I would be very concerned with this. An accountant cant work in partnership with a solicitor. They may just be peddling cheap documents they buy provided and badged by a law firm. A proper process is to refer the matter to a solicitor who will personally advise you...fee you and be liable for their advice. No solictor wants an accountant as their mouth piece. They would be concerned wfor the dumb things they could say and be liable for it since they would be seen as working as a partnership on inconjunction. Some accountas do this as it means they can sell what is VERY expensive sheets of reflex A4 paper.

Do you have a engagement and costs agreement wih the law firm ? If not..... You are not their client. Someone is being dishonest or misleading you. One of many I suspect.

Smells like a problem. Looks like a problem....I wonder if its a problem ?

 

why not just go direct to the law firm?

 

Question : Is the use of this trust going to provide me with a main residence exemption. And be assured of asset protection for creditors / spouse/ trustee in bankruptcy etc (as applicable
Please email your advice to me.

 

Hi all.

I am looking at setting up a main residence trust and have just read this thread.

Has anyone ever done this successfully?

Thanks