selling biz from trust to company

Hi all,

my accountant just floated me this idea which sounds amazing is this legit?

so i need to change my biz from trading from a family trust with corporate trustee structure to a company as i can no longer distribute profits to family members due to last year changes in law from ato.

i'm gonna try n reuse corporate trustee company as the new trading company and set up new abn and what not for next fin year and delete the trust as it wont be needed (most likely).

my accounts said i can sell the business to the new company entity so i get the 50% CGT concession and then ontop of this can get the 25% small business CGT concession so if i sell it for 1M profit etc 750k is tax free?

it sounds to good to be true, is this normal?

 

No such a law change!

you mean the trustee can sell the business?

It could be. How will the company get the money to pay for the business?

But what about the restructure rollover relief to avoid CGT altogether.

 

you mean "it could be" to my comment about how it's to good to be true or that its a normal thing?

hmm if im director of new company could it somehow be a private loan that i guarantee to the old trust structure and the new company structure just pays down this loan from the future profits? making it tax effective.

yea idk how that works :s the rollover thing

 

There are 4 different small business concessions which could apply so the CGT could be minimal or even eliminated if the requirements are met. But it depends on a lot.

There are a number of ways that a company could fund such a purchase too, such as vendor finance - you and the trustee should be seeking legal advice as well as the tax advice as there is a lot more to it.

Rollover should be considered as it eliminates tax. But it could be worth triggering CGT now if it is going to be small so that future cost base of the business is much higher, which may save tax at that point.

Not sure what you mean about distributing to family members. There has been no change in the law, and not sure how you think a company can help in this regard?

It might even be best to not do anyting.

 

the trustee is a corporate trustee which im the director of, and i'd be the director of the new company. i see your thing says youre a tax adviser are you able to send me your rates would be good to discuss before i set it up tried to private message you but couldn't find the button.

 

I'm not taking on legal clients anymore. But you should get a second opinion at least.

 

The "law change"bit sounds concerning. I know of no law change. Are they explaining a PSI issue which is a issue even if the change occurs. If its a PSI issue the change may fall foul of Part IVA and also PSI rules anyway. I agree to get some decent tax advice. For you to be still confused the advice isnt good.

I would think if anything was discussed it may have been how to make the change and its exempt.

 

OP might mean the Div100A guidance. It's the only thing I can think the accountant may mean.

It wasn't a law change and doesn't mean you can't distribute to family members, so I agree that further advice or a better understanding of the advice is necessary.

To the original question, rollover relief MAY be available, for changing business entitiy from a discretionary trust to a company, but can't be definitive without a lot more information. Hence - advice.

 

s100A