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issue of new shares to children soon to be adults

Discussion in 'Accounting, Tax & Legal' started by jb, 2nd Jun, 2008.

  1. jb

    jb New Member

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    We have a company which holds land and if all goes well will begin a subdivision in the next few years. Shares are held in mine and my husbands name. (1 A ordinary and 1 B ordinary) I would like to issue a share each to my teenage children so profits can be distributed to them when they are adults. I want the company to be able to distribute differing amounts of dividends over the years. Can we distribute differing dividends to the different class of shares? and what a tax implications would there to be to issuing new shares. (Stamp duty etc (Qld)) Will they have to purchase their shares with cash or can the company just issue them both a share each. Was about to email our accountant over this but thought I'd get some opinions first. This is the first time I have been on this site.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    It's a pity the company already has land holdings - otherwise I'd suggest transferring your shareholdings into a discretionary trust - this way the company could distribute all profits to the trust, and then you could choose how to further distribute to the beneficiaries of the trust.

    This may be still worthwhile - you'd need to look at the potential costs in doing so.

    I don't know enough about share classes to know what the implications are of your suggestion there - I'll have to leave that up to the experts.
     
  3. jb

    jb New Member

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    Thanks Sim, We do have a family discretionery trust but the company is a trustee of that trust which then creates further complications I think. I am not sure of what the tax complications would be either as the land has increased in value. I will look into this though.
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    hmm - definitely get some advice on your structure I think ... the trustee of your trust should generally not own any assets.
     
  5. Rob G.

    Rob G. Well-Known Member

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    Holding assets in a company is generally a concern where the same company carries on a business. Also the company does not get the CGT discount.

    I assume that the company will be a developer so perhaps CGT is not so much of an issue ?

    Anyway, issue of shares at less than market value might trigger the CGT value shift provisions.

    This can result in cost base adjustments and perhaps a CGT liability.

    One thing to watch with different classes of shares is that there is no streaming of franking credits by varying the percentage franked to each distribution and between classes.

    Cheers,

    Rob
     
  6. jb

    jb New Member

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    Hi Rob G,

    The company will hopefully be a developer if all goes well so CGT will not apply.

    I haven't heard of CGT value shift so I'll look into that.

    What do you mean by streaming of franking credits? I understand franking credits and obviously we want any dividends to have a franking credit attached to it.

    Thanks,

    jb