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14th National Tax Intensive Retreat: Trusts Under the Microscope

Published on 23 Nov 2006 | Took place at Sheraton Noosa Resort and Spa, National

This retreat was held on:
- 17-19 August 2006
- 23-25 November 2006.

The theme this year was “Trusts” with all of their varying complexities laid bare. The focus ranged from getting distributions right, structuring for CGT exemptions (particularly in the light of Budget 2006) and asset protection through to internationalisation of trusts and trusts on death. As usual the Retreat concentrated on the practical application of technical matters.

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Individual sessions

Trusts revisited

Author(s):  John W DE WIJN

The trust is, at its core a simple concept, regularly complicated by tax and trust law changes. The High Court has recently handed down its decision in CPT Custodian and this may radically impact on the way tax practitioners deal with trusts. Then again it may not. This paper answers these questions (and others):

  • when are beneficiaries of a trust 'absolutely entitled' to trust assets as against the trustee?
  • what interest does a unitholder have in the trust assets... and does it matter?
  • what is left of the reasoning in Charles Case following the CPT Custodian decision?
  • can we still maintain that income and capital retain their character as they flow through a trust?
  • what does the ATO think of all this?
This was also presented by Philip Bisset at the "Trusts Revisited - A Review of Recent Cases" seminar held in Perth on 5 October 2006.
Materials from this session:

Small business CGT concessions and related trust issues

Author(s):  Mark PIZZACALLA

The small business CGT concessions offer significant opportunities, but you must be skilled enough to find them! This paper highlights the key issues you need to be aware of in relation to trusts, and budget changes, including:

  • analysis of the maximum net asset value test
  • the connected entities rule and the active asset test
  • the controlling individual and CGT concession stakeholder tests
  • structuring issues and ordering of the concessions
  • contract implications
  • identifing the controller of discretionary trusts.
This paper was also presented on 27 October 2006 at the Tax Intensive Seminar held in Victor Harbor, SA.
Materials from this session:

Workshop 1: CGT small business concessions

Author(s):  Moira MERRICK These case studies will have a primary focus on structuring for CGT concessions (but also cover CPT Custodian issues).

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Trust distributions

Author(s):  Peter ALLEN

How do you effectively distribute from trusts - the legal and taxation requirements raise a myriad of issues when drafting trust distributions. This paper will address issues including:

  • what are income or capital gains that can be distributed?
  • streaming or targeting income to beneficiaries
  • defining, identifying or creating beneficiaries
  • income clauses and trustee resolutions for trusts in a post-BRK (Bris), Ramsden, Idlecroft & Nemesis world.
Materials from this session:

Testamentary trusts: not just 'another' trust

Author(s):  Arlene MACDONALD

Planning for how assets will be passed down through successive generations can take the form of simply leaving an asset to someone, or can involve some 'ruling from the grave' and the inclusion of a testamentary trust in the succession planning process. There are many traps for the unwary in planning the terms of the trust and this paper explores:

  • what peculiarities are involved in this style of trust, for instance when does it start, whether you can vary the terms of the trust and when does it end?
  • what are the income tax advantages and potential planning issues?
  • what drafting issues do you need to be aware of?
  • what are the peculiar and particular income tax and CGT issues for the trustee?
  • what are the current issues with life interests?
Materials from this session:

Amending trust deeds

Author(s):  Grahame Young

This paper covers:

  • power to amend
    • express and statutory powers of amendment
    • inherent powers of the Court
  • why amend?
    • management powers - investment, transactions, income recognition and streaming, etc.
    • beneficiaries - (identity, entitlements, exclusions) trustees, appointors and guardians appointment and removal, succession, powers
    • splitting and cloning - external and internal trust splitting post CPT Custodian
  • status of the “Statement of Principles” - and an analysis of what constitutes a resettlement for CGT Event E1 purposes
  • CGT and stamp duty consequences
  • alternatives to amendment
  • practical illustrations.
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Workshop 2: Trust distributions, testamentary trusts and amending trust deeds

Author(s):  Andrew Noolan This workshop focusses on trust distributions, testamentary trusts and amending trust deeds.

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Bankruptcy and the implications for asset protection

Author(s):  Michael LHUEDE

How do we assist clients to protect the wealth we help them generate? In recent years there has been a concerted push to enable assets to be recovered in bankruptcies. This paper will examine:

  • using trusts to optimise asset protective structures
  • competing issues when designing asset protection for clients
  • implications of the High Court decision in Cummins’ case and proposed anti-avoidance provisions
  • use of international trust structures for asset protection.
Materials from this session:

International trusts

Author(s):  Campbell RANKINE

This paper focusses on tax planning for individuals who migrate from the United Kingdom or New Zealand to Australia, or from Australia to either of those countries. It considers the tax issues that arise where the client controls trusts established in the country of entry or exit:

  • determining whether a trust is an Australian resident
  • Australian tax consequences of foreign trusts earning income from 'tax haven' countries
  • advising a NZ or UK resident client changing residence to Australia of tax consequences for controlled foreign trusts
  • advising a client of the Australian tax consequences for a controlled foreign trust if client becomes a non-resident.
Materials from this session: