Family Trusts still worth considering: HLB Mann Judd Sydney

Neuberger Berman opens first Australian fund
September 26, 2011
Gap between what advisers provide and investors expect needs closing: EQT
September 28, 2011

Despite continual changes to the tax rules regarding family trusts, they still offer many benefits, particularly in wealth accumulation and intergenerational wealth transfer, Mr Peter Bembrick, tax partner with accountants and advisers HLB Mann Judd Sydney, advises.

Despite continual changes to the tax rules regarding family trusts, they still offer many benefits, particularly in wealth accumulation and intergenerational wealth transfer, Mr Peter Bembrick, tax partner with accountants and advisers HLB Mann Judd Sydney, advises.

“It is true there has been a hardening of attitude by the Tax Office to many of the tax advantages once offered by family trusts recently, but they still have a valuable place in managing and protecting assets.

“This is especially so at the moment with an increasing number of self-employed and small business owners, and the largest ever intergenerational transfer of wealth about to take place.”

Mr Bembrick said that the benefits of family trusts include:

  • They are a good vehicle for building wealth and passing on assets to subsequent generations (for example land owned by the families of graziers and farmers).
  • Protection of investment and personal assets from business and other risks (especially important for business owners at a time the Australian economy faces an uncertain future).
  • Flexibility to allow tax effective structuring of investments and businesses (including in the way income is distributed to family members).
  • Having a family trust as part of a business structure so that any future sale is more tax effective (particularly so that full advantage of CGT concessions on retirement can be taken).
  • Giving a high degree of flexibility in dealing with income from assets and its distribution to family members (enabling distribution to family members to be made according to circumstances).
  • Adding to the options available in estate planning – especially to protect interests of young family members or future generations (for example, allowing a holiday house to be passed from generation to generation without CGT becoming payable each time it changes hands).

He added that family trusts are generally more tax effective than a company for holding appreciating investment assets.

“However, the value of a trust to a family will depend on that family’s circumstances, so specialist advice is always recommended.

“There are also time limits on the ability to pass assets down through generations using a single trust. In most states and territories the maximum life of a trust is generally 80 years.

“Once a trust reaches the end of its life tax consequences may arise, although the effects can be minimised with good planning.

“Another important aspect is that setting up a family trust should be considered before assets are accumulated. For example, transferring an asset held in an individual’s name into a family trust can be very costly because of stamp duty and other charges,” Mr Bembrick said.

HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and a member of the HLB Mann Judd Australasian Association.

-oOo-

For more information please contact:

Peter Bembrick – 02 9020 4223

26 September 2011