CGT boon for trusts

capital gains

12 November 1999
| By John Wilkinson |

Trusts will still benefit from some capital gains concessions under Ralph, says Pe-ter Bobbin, a partner of The Argyle Partnership.

Trusts will still benefit from some capital gains concessions under Ralph, says Pe-ter Bobbin, a partner of The Argyle Partnership.

"Trusts still remain the preferred business or investment vehicle under Ralph," he says.

"Certain Capital Gains Tax (CGT) concessions not currently available to compa-nies will continue to be available for trusts," he says.

Under the proposed Ralph rules, the 50 per cent goodwill exemption benefit will flow tax free through the trust and the ability to split income appears to remain available, Bobbin says.

As the new rules will benefit individuals, Bobbin says a partnership using a service trust might be a suitable vehicle for planners to use under the new regime.

The service trust would cover the administration side of a planner's firm and the principals would pay a monthly charge to the trust for the services.

In the service trust would be all equipment, staff such as receptionists and back-room administration personnel.

"The service trust charges the partnership a fee for providing these services and generally they would be marked up by 20 to 25 per cent," he says.

The partners of the practice would then have a discretionary family trust for asset protection purposes.

"Under Ralph, 80 per cent of the assets will be CGT free and this will see individ-ual partnerships operating these service trusts," Bobbin says.

Trusts are to remain a significant tool for financial planners under the new tax re-gimes, Bobbin says.

"Trusts will still be valuable for social security reasons and asset protection will be a cornerstone of trusts," he says.

"Asset protection will be important to the financial planner as it will enable them to keep clients with the use of various trusts."

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