Transfer shares to Family Trust

My late father was the majority shareholder in an unlisted investment company which holds a substantial portfolio of listed shares which have a market value well above their purchase price. My sisters and I are are in line to receive his shares when his estate is distributed.

I am considering establishing a family trust (for the usual sorts of reasons), and I am considering placing my shares in the investment company in the trust. What are the CGT implications of this? I know that if they were listed shares it would be a CGT event, but I am not clear on what happens with shares in unlisted companies.

 

Japanese investor - same CGT rules apply for both listed and unlisted in this instance.

Whether CGT would apply would depend on the terms of the will.
seek legal advice as you may be able to get them into a post death testamentary trust. see s104AG of ITAA36.

 

Since the company was established well before 1985, I understand CGT would only be levied the difference in value that may have happened between me inheriting and placing them in the trust. Am I interpreting that correctly?

The will was a straight split between the 3 of us - no testamentary trust. Whether the executor(s) could pass the shares straight to a discretionary trust is an interesting idea to explore. By the way, it seems that there is no Section 104AG in ITAA36 - there is a gap between 103A and 109.

Thanks for the useful answer.

 

If pre CGT asset the cost base could be the value at death.

Sorry it is s102AG
see
INCOME TAX ASSESSMENT ACT 1936 - SECT 102AG Trust income to which Division applies

see subsection 7

It would be unlikely the executors could pass to a trust, but the beneficiaries may. CGT may apply, but it could be minimal. But I am not sure this would help you unless you are under 18.

Seek legal advice

 

If I pass the shares to a discretionary trust, then the income can be spread around several family members, e.g. my adult children, taking advantage of their lower tax margins.

Thanks again, and yes it is worth exploring all this with the legal firm organizing the estate.