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SMSF as beneficiary for Family trust capital distribution

Discussion in 'Accounting, Tax & Legal' started by MarkG, 15th May, 2015.

  1. MarkG

    MarkG New Member

    Joined:
    15th May, 2015
    Posts:
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    Location:
    Canberra, ACT
    Hello,
    My partner is a beneficiary of a family trust which has just sold a property. The proceeds of that sale is to be distributed to the beneficiaries of the family trust as capital.
    Is it possible for my partner's SMSF to be made a beneficiary of the family trust and then have the capital distributed to it? Does this reduce the capital gains tax due?

    We would be hugely grateful for any advice here.

    Thanks,
    Mark
     
  2. Terryw

    Terryw Well-Known Member

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    Location:
    Sydney
    Unless it is a fixed trust the income will probably be non arms length income and taxed at 47%
     
  3. MarkG

    MarkG New Member

    Joined:
    15th May, 2015
    Posts:
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    Location:
    Canberra, ACT
    Thanks for replying Terry.

    My key question is whether there is a difference between a distribution from the trust being capital rather than income. Is a capital distribution that goes to a SMSF treated as special income and taxed at 47%?
    If the capital is distributed to an individual beneficiary, it is subject to capital gains tax, at their tax rate for that year. Is there a tax advantage by having the capital go into the SMSF instead?

    Again, I would be most thankful for help.

    Mark
     
  4. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    Capital gains are taxed when received by an individual from a tax, but capital distributions are not (unless it triggers a CGT event such as selling a house). See s 99B(2)(a) ITAA36

    Distributing to a SMSF would be taxed depending whether it would be a concessional contribution or non concessional.