- Always be careful dealing with trusts.
- Carefully check revenue rulings before acting.
- Trust resettlements can still happen.
Many years ago Paul and Polly used a small inheritance to purchase their first pub. It was a lot of hard work but it succeeded and the business grew. At the same time they raised two boys, Peter and Patrick, and found the time to make a good job of it.
Acting on advice from their accountant, Prudence, Paul and Polly purchased their pub in a family discretionary trust they called the Polpall Family Trust.
The potential beneficiaries were defined as Paul and Polly and descendants. The trustee was P & P Properties Pty Limited with Paul and Polly as shareholders and directors.
Now, the business has grown and, with help from Peter and Patrick (their children), they have developed two thriving pub businesses – one in Parramatta and one in Penrith. Paul and Polly have a healthy balance in their super fund so have decided to hand over to the boys and travel.
Peter has been running the Penrith business for some years, and Patrick Parramatta. Both are now married with children and would like to have separate ownership of each business.
The problem is, as their accountant, Prudence, tells you, that the pubs have a large accrued capital gain and the Trust is not eligible for the small business CGT concessions.