Steps to wind up a Hybrid Discretionary Trust?

Discussion in 'Accounting and Tax' started by mja, 14th Jun, 2015.

  1. mja

    mja Capitalist.

    22nd Apr, 2006
    Sydney, NSW
    Hi all,

    I sold the only asset (a propertyt) that was in my HDT (with corporate trustee) last October. I'm not looking at keeping this trust around going forward, so is it relatively simple to wind up or do I absolutely have to involve my accountant?

    From research, shouldn't it just be a matter of doing ASIC paperwork, closing down the corporate trustee and then a final tax return?
  2. Terry_w

    Terry_w Member

    19th Mar, 2012
    Sydney, NSW
    Accountant not needed but a lawyer may be.

    First step is to read the deed. See if it is possible to vest the trust early. See who can exercise this power and how. Then follow the instructions in the deed. Are any consents required and if so by whom and how. Property of the trust would need to be distributed to the relevant beneficiaries.

    Follow the requirements in the relevant trustee act too. Probably a need to advertise for potential creditors to make claims.

    The trustee would need to make a resolution to distribute and vest the trust of income and capital and possibly a deed to vest.

    No ASIC requirements with winding up a trust. Must notify the ATO and cancel ABN and TFN - trust should do its final tax return first.

    If you want to wind up a company then there are further requirements and forms with ASIC.
  3. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

    2nd Jul, 2013
    The trust may also end of its own accord. A trust must have property. If the bank accounts are distributed to beneficiaries after the sale the trust may cease to exist in law. Legal advice should be considered before a trust is used again in such cases.

    And it can happen with the novice being aware. So several months later you decide to use the trust for a new purchase. You end up with a apparent trustee company owned property owned by a company perhaps ? And a costly stamp duty issue to fix it. True story - ATO argued the trust had ceased to exist. They argued that the later sale was by a company. And a huge Div7A issue that they sought to enforce.

    For unit trusts its also possible to mistakenly end the trust. Saw an accountant do this once and it resulted in a PI issue. They had a client with a unit trust that owned property. For some reason he thought having a single unitholder seemed smart. So he suggested that the trustee company be the unitholder. In such a case where the trustee and beneficiary are the same the legal and beneficial ownership merge. The trust ceases to exist. Cant be undone as that accountant found. And a CGT event.
    Last edited: 16th Jun, 2015