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Setting up discretionary trust - CGT and stamp duty

Discussion in 'Legal Issues' started by scientist, 9th Sep, 2015.

  1. scientist

    scientist Well-Known Member

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    If I set up a discretionary trust where I am both the settlor and the trustee, then property I initially owned being transferred to the trust doesn't actually change legal ownership. Does that mean if property is transferred this way, I won't trigger a Capital Gains event, as well as a Stamp Duty event?

    E.g.

    I own a house.

    I set up discretionary trust ABC with beneficiaries Me and Wife, and I am the sole trustee.

    I transfer said house to the trust.

    Does this action trigger CGT and stamp duty?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    It still changes from being owned by Scientist to being owned by Scientist ATF ABC Trust , so yes and yes.

    Also, that's not a very good way of setting up a trust :)
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is a declaration of trust. Cgt and stamp duty triggered
     
  4. scientist

    scientist Well-Known Member

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    Thank you!

    Ok the issue is my wife and I own properties under our name and as we continue our journey of wealth creation I'm becoming more aware of asset protection needs whereas before it wasn't a consideration.

    Before I engage a lawyer and pay money, can I get a rough idea of what options are available to me to achieve asset protection? Of course, if in principle there are worthwhile options, I'll engage a lawyer and get proper advice before acting.

    Basically my goals are:

    1) asset protection
    2) don't trigger CGT and stamp duty
     
  5. D.T.

    D.T. Adelaide Property Manager Business Member

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    Is asset protection something either you or your wife do? (Do you work in risky occupations?)
    What state are the properties you have in? (Is landtax an issue?)

    When someone wants to sue you, they'll do a search to see what you own to see if it's worth their time/cost as it wouldn't be worth it if you owned nothing. Sometimes just having a mortgage over the properties is enough as they know the banks will take their share first if the properties are liquidated.

    Could there be any harm in buying future properties in a trust and leaving existing ones as is?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Once you own an asset it is a bit late to be thinking of asset protection against bankruptcy.
    Some options are
    1. disposal and/or
    2. related party contracts
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    As @DT said, look to a trust for further purchases. Sell what you have & pay cgt on those if you are keen. Remember the downside of trusts (laws vary in each state).
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Even on disposing of assets you will have a problem - proceeds from the sale.

    You will have to carefully consider how to protect that asset.
     
  9. scientist

    scientist Well-Known Member

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    Wife and I haven't been thinking of asset protection at all in the past, so we currently own 2 properties each under our own name. The main guiding factor up till now has been tax minimisation.

    Putting future acquisitions into a trust is definitely an option that will be considered - I really need to sit down with a lawyer who's an expert at tax law to help me figure out the details on how to go forward.

    Also seems like there's no real way to protect existing assets without triggering CGT / stamp duty, is there?

    Thanks - could you elaborate on what you mean by point 2?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Borrowings with mortgages, options, long term leases, gifts etc

    See my legal tips posts