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Tax due diligence in a trust context

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Published on 01 Apr 20 by "THE TAX SPECIALIST" JOURNAL ARTICLE

While it is true to say that trusts are generally “flow-through” entities, in the sense that the beneficiaries are usually subject to tax on the taxable income of the trust each year, rather than the trustee, there are a range of circumstances where this is not the case such that the acquirer becomes exposed to tax liabilities (or a retiring trustee tax indemnity) relating to pre-acquisition transactions or events. Investors should be aware of the differences in the nature of tax risks involved when acquiring a trust (including trusts subject to the attribution managed investment trust regime) as compared to the issues that can arise on the acquisition of a company, and the different tax due diligence enquiries that should therefore be undertaken. This article outlines the types of tax exposures that can arise in a trust context, together with mitigation strategies, as well as historical matters that can impact on after tax returns following acquisition, such as the ability to access managed investment trust tax concessions and managing “built-in” capital gains.

Author profile

Max Persson
Max is a real estate tax partner specialising in corporate and international tax. He has over 18 years of tax experience and works with a number of large multinational property groups, including stapled entities, as well as listed and unlisted funds and private groups. Max has a deep understanding of the taxation of direct property investments and the establishment of real estate fund structures for domestic and offshore investors. He also has significant experience in property development, construction and alternative real estate investments. Max is an active member of the Property Council of Australia’s Income Tax and International Tax Committee and Retirement Living Council, having been involved in lobbying on a number of key reform areas. - Current at 22 November 2017
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