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ARTICLE · 10 AUGUST 2018

Trust splitting: no longer an estate planning option?

Cooper Grace Ward
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Draft taxation determination 2018/D3 outlines the ATO view that a trust split potentially triggers CGT consequences.

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Scott Hay-Bartlem
Scott Hay-Bartlem
Clinton Jackson
Clinton Jackson
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Fletch Heinemann
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Linda Tapiolas
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Greg Cahill
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Hayley Mitchell
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The ATO has released draft taxation determination 2018/D3, outlining their view that a trust split potentially triggers CGT consequences (CGT event E1).

A 'trust split' is a process of dividing the assets of a trust (generally a family discretionary trust) into a number of smaller sub-trusts to enable one group of beneficiaries to control certain trust assets and another group of beneficiaries to control other assets.

Despite the uncertainty on the tax treatment, trust splitting has been used by many lawyers as an estate and succession planning tool.

After the publication of TD 2018/D3, trust splitting is now unlikely to be seen as a commercially viable option when considering your, or your client's, succession planning options due to the potential tax consequences.

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