Hi Oz,
I'm looking at setting up a corporate trust and this trust will purchase 100% of my company. One day I'll put all my assets and liabilities in to the trust also.
I'm meeting my accountant in the new year to put the wheels in motion. I'm just seeing if anyone has any advice and/or experience with this method?
that only applies if you sell the asset right?
The shares of the company itself are an asset - and the total valuation of the shares is the same as the company's current worth. If you transfer these shares to the trust you will need to pay capital gains on this gain. How much is the company worth?
Changing ownership from personal or company to trust is considered a sale and will attract CGT.
Not necessarily true, there are CGT exemptions for rollovers of business assets, particularly small businesses, so they may be available
BTW, as far as I can tell your terminology isn't 100% correct. Rather than saying "corporate trust", I assume you should really be saying "trust with a corporate trustee".
I don't have a trust, only a company. Google says, "companies created to manage a trust on behalf of the beneficiaries". I didn't think the operating company would manage the trust and the trust operate as its own entity? Or will i require a company to run the trust as well as my privately operated company?
You will need to setup another company to be the corporate trustee. Every year you will also need to do a tax return for the trust in addition to the operating company. As mentioned above any transfer of assets from a personal name to the trust is a CGT event so you will need to pay tax to transfer your company into the trust. If you plan on having assets in the trust it is best they are bought in the name of the trust in the first place.
Ok thanks for the info.
How did you go with your accountant? Did he recommend you set up another company to act as a trustee of your trust. And is your operating entity still the original company you were going to transfer the shares from yourself to the trust you were setting up?
Is it an operating or investing company?
Operating
Out of curiosity why aren’t you going a trust with corporate trustee as opposed to just a straight company?
I'm not too sure. I guess these are questions I can run past my accountant. I was just under the impression you have a corporate trust and the company operates from that trust?
Got to love the way people try to minimize paying tax.
It’s not just about minimising tax. A trust can also provide asset protection.
There are private trusts, and there are public trusts. Accountants/legal practitioners only do the public trust. Wealthy people have both trusts.
Well actually, I think you would actually find accountants / legal practitioners mainly handle private trusts since they are by far the most common.
It would be a private trust. Maybe in the future depending on the size of expansion I would look into a public trust. Not in the near future.
Even if you gift your company shares to trust. You can't avoid paying capital gains tax. That will be calculated at market value of your company.
The same applies. You can put all your assets and liabilities into the trust. But you will be liable for CGT at market value and in case of real-estate, stamp duty on top of that.