Strategy for using trust losses from prior years

Discussion in 'Accounting & Tax' started by CZ0020, 3rd Feb, 2016.

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  1. Terry_w

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

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    John Smith 'has' a trust - you might mean John Smith is a trustee or a beneficiary of the JoTrust, or both.

    Just because 2 people are siblings doesn't mean they are beneficiaries of each trust. They might be.
    That also doesn't mean that trust A is a beneficiary of trust B. It will depend on the wording of the trust deed. It doesn't matter who controls a trust either.

    Example
    Bart is a beneficiary and trustee of the Bart Trust.
    Lisa is Bart's sister.
    Lisa is a beneficiary of X Trust - this was set up by her husband years ago with the husband as a named beneficiary. Secondary beneficiaries include spouses of the primary beneficiary, but not their siblings.
    So Bart is not a beneficiary of the X trust.
    But the Bart trust may still be a beneficiary because the X trust also includes as beneficiaries other trusts in which any primary or secondary beneficiary is a beneficiary of.
     
  2. Paul@PAS

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

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    I would suggest Part IVA would certainly apply. There may not be a basis for doing this OTHER than to produce a tax benefit. Hence Part IVA would consider it the dominant reason for the scheme. What the trust deed permits is not the final consideration. Yes a sibling may be eleigible according to the deed. Thats just trust legal principles to avoid a breach of trust. Not tax law.

    Also from a technical perspective other issues:
    1. Family trust election required and in effect ?
    2. Interposed entity election ?
    3. Test individual ?
    4. Is John or the company a beneficiary under the terms of the tax law requirements (irrespective of deed)