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Jansen Walsh & Grace

Wealth planning
Wealth planning is the process of building your wealth, preserving it (asset protection) and succession planning (planning the orderly transfer of your property and business portfolios and other assets to the next generation in the most tax-optimised manner).  Wealth planning comprises four components:
  • tax planning;
  • asset protection;
  • estate planning; and
  • business succession planning.
Most of our clients are concerned:
  • about asset protection from creditors;
  • that their children's assets are protected from claims in the Family Court or the Federal Circuit Court by their children's spouses and partners;
  • to ensure their assets will devolve to the next generation in accordance with their wishes without being disturbed by an order of the Supreme Court or the County Court;
  • to ensure an improvident child does not squander their inheritance;
  • to provide protection after their death for their minor children or children under a disability.
A smaller number of clients are concerned to establish a private ancillary fund to receive tax deductions during their lifetime.

Challenging your will: bulletproofing your wishes
If you are concerned about someone challenging your will after your death, there are five ways to ensure that your wishes prevail.

Superannuation is an essential component of wealth planning and estate planning.  We have another page with additional information if you have a SMSF superannuation fund.

Wealth transfer tax
The federal government is currently considering a bequest tax or a wealth transfer taxed along the lines recommended by Dr Ken Henry in his review into the Australian taxation system.  Our wills are currently being re-drafted with any future potential bequest tax or any other form of death tax, such as estate duty or probate duty, in mind.

Testamentary trusts
Currently, income received by minors from testamentary trusts is taxed at normal adult rates rather than the higher tax rates that generally apply to minors. However, some taxpayers are able to inappropriately obtain the benefit of this lower tax rate by injecting assets unrelated to the deceased estate into the testamentary trust. The Income Tax Assessment Act will be amended to clarify that minors will be taxed at adult marginal tax rates only in respect of income a testamentary trust generates from assets of the deceased estate (or the proceeds of the disposal or investment of these assets).

From 1 July 2019, the concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets that are transferred from the deceased estate or the proceeds of the disposal or investment of those assets.

Trust deed
The decision of the Supreme Court of Queensland in Thorne Developments Pty Ltd v Thorne [2015] QSC 156 shows that a properly drafted trust deed can protect your family trust if the trustee is deregistered or becomes bankrupt.  We have many years experience drafting trust deeds for accountants, lawyers and shelf company businesses.

Family trusts
You cannot bequeath assets in your family trust in your will.  However, your family trust is one of the most important aspects of your succession planning.  We can advise you how to deal with your family trust on your death.

Currently, where family trusts act as beneficiaries of each other in a ‘round robin’ arrangement, a distribution can be ultimately returned to the original trustee — in a way that avoids any tax being paid on that amount. This measure will better enable the ATO to pursue family trusts that engage in these arrangements by extending the specific anti-avoidance rule, imposing tax on such distributions at a rate equal to the top personal tax rate plus the Medicare levy.

The federal government will extend to family trusts a specific anti-avoidance rule that applies to other closely held trusts that engage in circular trust distributions.

Land transfer duty payable on transfer to beneficiary of family trust
A transfer of real property by the trustee of a family trust or other form of discretionary trust to a discretionary object (often called a beneficiary) of a family trust is exempt from land transfer duty provided no consideration has been paid.  Section 36A(1)(e) of the Duties Act provides: "No duty is chargeable under this Chapter in respect of a transfer of dutiable property that is subject to a discretionary trust (the principal trust) to a beneficiary of the trust if— (e) the Commissioner is satisfied that the transfer is not part of a sale or other arrangement under which there exists any consideration for the transfer."  Obviously, if the beneficiary pays any consideration to the trustee, the exemption does not apply.  However, this also applies where there has been forgiveness of a loan or debt, as occurred in Astakhov v Commissioner of State Revenue [2018] VCAT 1363, decided on 4 September 2018, where Member Tang held the the transfer to a specified beneficiary under the trust was not exempt from land transfer duty.  The beneficiary had to pay $112,200 land transfer duty to the Commissioner.  The lesson is that you must be careful in planning these transactions.

Increase in SMSF membership limit to 6
In April 2018 the Honourable Kelly O'Dwyer, MP, the Minister for Revenue and Financial Service, announced that the federal government would introduce legislation to amend the Superannuation Industry (Supervision) Act 1993 to increase the limit to 6 members.  This would be a great boost for small businesses which use an SMSF structure and allow greater flexibility in estate planning and business succession planning.  For example, a larger family group can acquire a large property portfolio.

Trust surcharge
If you are the trustee of an absentee trust that owns taxable land as at 31 December 2017, you must inform the State Revenue Office before 15 January 2018.  The trustee must pay the absentee owner 0.5% surcharge on the trust’s 2016 land tax assessment.  Contact us if you are unsure what that means for your trust.

If the Commissioner issues an assessment imposing land tax under the Land Tax Act at the higher rate applicable to trusts, ie, the trust surcharge rate, then the taxpayer has the burden of proving that the surcharge rate does not apply.  This was decided by Member Tang on 13 June 2018 in Vantere Pty Ltd v Commissioner of  State Revenue [2018] VCAT 901.  Member Tang reached his decision based on the decision of Croft J in CDPV Pty Ltd v Commissioner of  State Revenue [2016] VSC 322 at [45] (in the context of the primary production provisions of the Land Tax Act): “The Commissioner is [...] at an evidentiary disadvantage inasmuch as those who are seeking an exemption have within their control almost all of the evidence in relation to what is occurring on the Land and why things were or were not done on the Land. The Commissioner can only really point to objective circumstances with a view to determining the position. Consequently, I accept that, when the Court is faced with a case with very uncertain evidence, a focus must be maintained on whether the onus has been meet.”

Complying trusts to meet the requirements of the US Internal Revenue Service
We can provide trusts which comply with the requirements of the US Internal Revenue Service.  These are used by Australians living in the USA.

Islamic family trusts
We can provide you with an Islamic family trust.

Trust minutes
The Victorian Supreme Court has provided a timely reminder to trustees of family trusts who record the reasons for the exercise of their discretion to distribute income or capital or to make any other decisions.

Normally, beneficiaries are only entitled to trust documents, for example, trust accounts and the trust deed.  They are not entitled to the reasons for making a particular decision if the trustee has a discretion to do so.  The one exception is where the beneficiary alleges fraud.  In that situation, the reasons that the trustee gave may be open to scrutiny by the court.  That is why we recommends that the minutes not set out any reason for making a particular decision.  We are aware that many third parties require trustees to do precisely that.

In Mandie v Memart Nominees Pty Ltd [2014] VSC 290 the plaintiffs, two beneficiaries, sought the following information: what the information the trustee had concerning the personal and other circumstances of the plaintiffs and from whom the trustee obtained that information.  They contended that they were merely seeking information as to the basis upon which the trustee acted or, alternatively, the trustee had already volunteered  some of its reasons and was no longer entitled to claim the protection generally afffored under the law to discretionary trustees from having to disclose their reasoning.  Macaulay J held the proceeding was really an attempt to get around the protection, which one can only do if one actually alleges fraud.

In Mandie v Memart Nominees Pty Ltd [2018] VSC 719, Ginnane J upheld a statement of wishes by the instigators of the trust and the exercise of the discretion by the trustee not to consider certain objects for distribution.

Removing a beneficiary
You are a director of the trustee of a family trust.  You want to remove a beneficiary who is named in the trust deed.  The beneficiary has not consented.  The dangers of doing so were illustrated in Schreuders v Grandiflora Nominees Pty Ltd [2014] VSC 310, where the court ordered the trustee to provide the excluded beneficiary with copies of the documents relevant to the trustee’s decision.

In that case, the applicant was a named beneficiary in the schedule, although no distributions had ever been made to him during the life of the trust.  The trustee varied the schedule to the trust deed to remove him as a beneficiary.  When he discovered this, he made an application for preliminary discovery of documents relevant to the trustee’s reason for removing him as a beneficiary,  alleging that this may have been done for an improper purpose.  Garde J observed that even if he had been reinstated as a beneficiary, it would not mean that he would ever receive any distributions.  Nevertheless, Garde J upheld the associate judge’s decision to order that the trustee provide preliminary discovery of those documents.

It is rarely necessary to remove the name of a beneficiary from the schedule to the trust deed.  So one has to be careful about removing a beneficiary for no real purpose.

Of course, banks often insist upon a particular beneficiary being removed, and that would be a sensible reason for doing so.

Shares held beneficially
The case of Deputy Commissioner of Taxation v Haritos [2014] VSC 379 highlights the importance of properly recording the beneficial owners of shares and to have declarations of trust professionally drafted. 

In that case, the accountant gave evidence that the directors of a company wanted the shares to be held by “the girls”, their wives, but instructed him that the shares were to be issued to another company which the directors also controlled.  The clients denied that they gave that instruction, and asserted that they had always wanted the shares to be issued to their wives.  Some years later, they attempted to rectify this by a poorly drafted declaration of trust.  At the time, the second company was insolvent.  The Commissioner of Taxation alleged that the true owner was shown on the company register and the declaration of trust was an attempt to defraud creditors.  The Commissioner was successful.  The case illustrates the crucial importance of properly recording beneficial owners of shares and properly drafting declarations of trust.

Lost trust deed
The decision of McMillan J on 20 July 2018 in Application by South Melbourne Continental Pty Ltd [2018] VSC 398 shows the risk of losing the trust deed.  The trust deed was lost.   Her Honour held that there was insufficient evidence of the contents of the schedule to the trust deed and dismissed the application with costs.

Rotary Club not a charity
In Rotary Club of Melbourne Inc v Commissioner of State Revenue [2018] VCAT 1257, Member Tang decided on 13 August 2018 that the Rotary Club of Melbourne Inc is not a charity for the purposes of section 45 of the Duties Act, which provides: "No duty is chargeable under this Chapter in respect of a transfer of dutiable property to, or a declaration of trust over dutiable property to be held on trust for— (a) a religious, charitable or educational purpose; or (b) a corporation or body of persons established for a religious, charitable or educational purpose; or (c) a friendly society".