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Discretionary trust becoming a non-resident

Discussion in 'Accounting, Tax & Legal' started by naz, 22nd Jun, 2011.

  1. naz

    naz Member

    Joined:
    10th Sep, 2007
    Posts:
    18
    Location:
    Sydney, NSW
    A discretionary trust that I am trustee of, which was set up in Australia, may soon become a non-resident (according to Residency requirements for companies and trusts). It's unclear to me what the consequences of this are (would love pointers to resources/recommendations of professionals who have dealt with this before).

    My guess is that, upon becoming a non-resident, all assets will be deemed to have been sold, and capital gains will be payable on them. What happens after that? (Assume that the trust will not become a resident of any other country which seems possible to me since it doesn't meet the residency tests for any other country). Can the trust then keep income each year without distributing it (assuming the trust deed allows this) without paying tax to any country (of course there may still be witholding, e.g. 10% for interest earned in Australia, nothing for fully franked dividends etc)?

    What happens if the trust becomes a resident of Australia at some point in the future. Does the cost basis of all assets at that point reset?

    Seems like a trust being able to accumulate wealth without having to file tax returns is too good to be true.

    Is there any reason why it would be better to ensure the trust stays a resident?

    Many thanks for any advice.
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
  3. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney