It Depends Can trust cloning be used to transfer assets between trusts without duty or CGT? – Corporate/Commercial Law – Australia – Mondaq News…

Australia: It Depends Can trust cloning be used to transfer assets between trusts without duty or CGT?

18 January 2022

Cooper Grace Ward

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In this edition of 'It depends', senior associateKeeghan Silcock talks about whether you can use a trust cloningstrategy as a way to transfer assets between two trusts withoutduty or, potentially, CGT.

Hi, and welcome to another edition of It Depends. Today,I'll be talking about whether you can use trust cloningstrategy as a way to transfer assets between two trusts withoutduty or potentially CGT.

It depends. Trust cloning strategy is unique to Queensland. So,the first major it depends factor is where are the assets of thattrust located. If the asset you're looking to transfer islocated in Queensland, then trust cloning may be a strategy foryou.

So, what is trust cloning? Trust cloning, simply put, is whereyou have an existing trust that owns an asset and you want totransfer it out of that trust to a new trust. You set up the newtrust in a particular way. Importantly, so that it has the sametrustee as the first trust and the same trust interests as thefirst trust. And what that means is for a discretionary trust, youneed to have the same default beneficiaries or for a unit trust,you need to have the same unit holders. Or for an SMSF, you need tohave the same members of that SMSF and all of those trust interestsneed to be held in the same proportion as between those two trusts.If you satisfy those requirements and the transfer of the asset isdone correctly between trust one and the new cloned trust, then youcan, in Queensland, transfer an asset between those two trustswithout any duty.

However, there is no specific tax exemption that applies for CGTpurposes on the transfer of assets between the two trusts. Thismeans that the transfer of assets will attract CGT potentially,although it could be minimised or completely eliminated altogether,depending on the availability of particular concessions, such as asmall business, CGT concessions.

If you have a client who is wanting to shift assets out of atrust into a new trust in Queensland, we suggest seeking adviceabout whether trust cloning could be a strategy for them so thatthere is no duty payable on that transfer. Please feel free tocontact a member of our team who would be happy to assist withthat.

Cooper Grace Ward Lawyers

Cooper Grace Ward is a leading Australian law firm based inBrisbane.

This publication is for information only and is not legaladvice. You should obtain advice that is specific to yourcircumstances and not rely on this publication as legal advice. Ifthere are any issues you would like us to advise you on arisingfrom this publication, please contact Cooper Grace WardLawyers.

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