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Wednesday, March 10, 2010
Australia Closes Capital Gains Tax Trust Loophole
By Rachel Pannett
Dow Jones Newswires
CANBERRA -(Dow Jones)- Australia's Senate on Thursday approved legislation that will curb the use of trusts, mainly by wealthy Australians, to avoid paying capital gains tax on assets.
The new laws outlaw a practice known as "trust cloning", in which no capital gains tax is paid when an asset is transferred between trusts where the beneficiaries and terms of both trusts are the same.
The exception previously applied even when assets were transferred offshore to a nonresident trust, with unrealized capital gains escaping the Australian tax system permanently.
It was used mainly by high-wealth individuals as a succession-planning tool, allowing control of assets to be passed between trusts, often within a family group, without paying tax.
While removing the trust cloning exception, the legislation contains a new provision that will allow for a limited capital gains tax roll-over for the transfer of certain assets between trusts with the same beneficiaries.
Copyright © 2009 Dow Jones Newswires
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