Putting a private company into a testamentary trust

Say John owns all the shares in Holdco Pty Ltd. Holdco owns property.

John dies. All assets including shares in Holdco go into a testamentary trust.

Do dividends from Holdco be distributed to beneficiaries so that minors are taxed as adults?

Is there any difference between this and John dying holding the property personally, other than Holdco not getting cg discount?

 

The company cannot "be in a testamentary trust". The shares presently owned by the deceased in a company may become a Trust asset if the TT will validly addresses the deceased assets (incl the company shares).

If there are other shareholders then control of the company may not occur. Legal advice as part of drafting wills etc needs to consider these matters. ie : How is to be a DIrector ? How will Directors/s voting be controlled ?? How can the TT trustee address s257 of the Corporations Act ?

Minors may be taxed "äs adults" if a Dividend flows. The question would be who are the Directors that will declare a dividend. The TT cannot demand a dividend otherwise.

The CGT issues and dividends seem contradictory. A CGT gain on disposing of the shares by the TT could arise but a dividend cannot include a CGT amount.

 

Yes shares can get into a tdt if a individual owns them. Dividends should be excepted trust income as long as extra income not diverted into the trust.

 

There can also be non resident tax issues with TTs. What seems clever today could become a boat anchor if the beneficiary seeks to work overseas for several years. Or be a tax benefit eg FF income and capital gains but then subject to foreign taxation instead.

 

All the more reason why a tdt is a good idea as the primary beneficiary might be a non resident but the trust could be a resident trust.

 

The converse risk would be Cg event K3, yes? At least a tt lets you distribute to a resident company, for example, while the human beneficiary is non resident.

 

Can also be beneficial such as s855-10 and capital gains streaming. eg a NZ resident beneficiary.