Trusts are generally considered the
greatest British invention, (the sandwich comes in second), and Testamentary
Discretionary Trusts (TDTs) are the best of the best.
benefit of a TDT is the ability to get income into the hands of children and
have them taxed as adults.
benefit of TDTs is the ability to transfer a property owned by the trustee of
the trust to that of a beneficiary of the trust without triggering CGT. This
means an inspecie transfer of assets is possible without CGT.
dies and leaves his property portfolio indirectly to his children by
establishing 3 separate TDTs in his will. Bart’s trust will hold 3 properties,
as will 2 more trusts controlled by Bart’s sisters.
5 children, so is able to distribute the $100,000 in rental income to the
children tax free each year.
while the kids grow up and start working so any further distributions will
result in tax being payable at high rates. Bart decides to reduce the tax by
moving into the most expensive property and living there rent free. Then he
realises that the property is subject to CGT as it is held by a trustee and the
main residence exemption won’t apply.
decides to use the ATO’s concession and transfer the property from the trustee
to himself as a beneficiary under the will.
He gets a
private ruling first and this confirms the Commissioner will not treat this as
a disposal for CGT purposes because it is a transfer from a deceased estate to
that this is not law, but a concessional treatment by the Commissioner as
stated in Paragraph 2 of PS LA 2003/12 https://www.ato.gov.au/law/view/document?docid=PSR/PS200312/NAT/ATO/00001
Commissioner will not depart from the ATO’s long-standing administrative
practice of treating the trustee of a testamentary trust in the same way that a
legal personal representative is treated for the purposes of Division 128 of
the ITAA 1997, in particular subsection 128-15(3).”
See also PBR 99991231235958 – Questions 1 and 2
also PBR 1012603789935