Trusts - Diverting Income

W

WebBoard

Guest
From: Gordon Austin


Found this on the web - is this still possible?

Diverting (Investment) Income into Family Trusts without Moving Assets

You will often be presented with a client who has successfully built up a portfolio of investments over a long period of time. These investments might include real property which, during the course of time, have become positively geared.

Little regard may have been paid to tax planning in the early days of ownership of the assets, or in an attempt to negatively gear, the assets have been held in the individual's own name. Unfortunately, now that the assets are positively geared, the individual, usually the highest income earner in the family, is the recipient of all the income and cannot take advantage of the "income splitting" benefits of a family trust.

The obvious solution is to transfer the assets from the individual and into a family trust. However, the capital gains tax and stamp duty consequences of such a course of action usually make this an expensive and therefore unrealistic option.

All is not lost. There is a mechanism whereby income (i.e. rent) from real property can be transferred from an individual to a family trust without transferring the property into the trust (i.e. without incurring capital gains tax, stamp duty or invoking the assignment of income provisions of section 102 of the Income Tax Assessment Act). This mechanism is known as a "Concurrent Lease" and is a relatively low cost method of transferring net income into a family trust in order to "cash in" on the commercial and tax advantages of a trust.
 
Last edited by a moderator:
Reply: 1
From: Paul Zagoridis


As usual get proper advice.

(And to all the trolls and lurkers who take this idea, abuse it and get it shut down: what goes round comes around and your turn will come).

Basically your trust signs a nice long lease with the landlord that for commercial reasons makes sense (because it can't be to merely split income). I will not spell that out further (see second paragraph).

The trust then sub-leases to the end user on different (and more profitable) commercial terms.

The trust then makes profits and can distribute them to beneficiaries in accordance with the deed.

Not you are still the owner and subject to all legal and technical requirements of ownership. So it isn't as good as having the asset in a trust.

Paul Zag
Dreamspinner
The Oz Film Biz site is archived at...
http://wealthesteem.dyndns.org/
 
Last edited by a moderator:
Top