Family trust for Property

[m3ntis]

Hi guys - newbie question, apologies if this has been covered elsewhere or is s'tupid!..

Have read alot about Family trusts for investment property but have a basic question that i'm interested in opinions..:

Q: if you gift property into a family trust and then sell it after 'X' yrs (eg 20yrs) - but the money is distributed back to the Trustee, its taxed at 33%?

Reason why I ask is from that angle it then looks like a 33% tax on holding the asset in the trust & would then require tax 'planning' in how to get the money out..

example:
- 2 properties bought for $200k ($100k each), gifted to Trust. For simplicity, income & outgoings are neutral each yr so no profit/ no loss. After 20yrs the properties are sold for $100K each (so no gains)

...and the money distributed to the Trustee (as the trustee is beneficiary while 'alive')

- the $200K is subject to 33% tax as its distributed to the Trustee? in this scenario (neutral P&L, beneficiary is the Trustee etc)...it would have been better to NOT put the properties in the trust(?)

Interested if I've understood this correctly...
Thanks for you patience!

[Anthonyacat]

Short answer, no. You haven't understood correctly, and there'd be no tax in most cases given the above scenario.

I'm working remotely at the moment and I don't have time to cover in full I'm afraid, but Trusts can distribute either or both income (taxable) and capital (non-taxable). Have a quick google, and come back with any questions I can try to answer next time I'm on.

[m3ntis]

Thanks very much!

[Perry]

Trusts usually make distributions to beneficiaries. The beneficiaries of those distributions-of-Trust-income are taxed at the tax rate of the individual recipient beneficiaries. Only retained-within-the-Trust income is taxed at the Trustee rate.