The Class Discretionary Trust

• To own and operate a business on behalf of multiple families
• To hold multiple families' passive investments (incl. shares or property)
• To hold multiple families' interest in a partnership business

• The structure is protected from claims by creditors of the beneficiaries.
• Beneficiaries are protected from claims by creditors of the structure.
• Assets are protected from claims by future spouses of principals and children.

Note: the availability of asset protection is based upon the structure itself. Care should always be taken to review loans/entitlements that may exist between the various parties, including personal guarantees that may have been given.

INCOME TAXATION

• Income accumulated by the structure will be taxed at the highest marginal income tax rate plus the Medicare levy (46.5%).
• Flow-through taxation applies, so that income distributed by the structure will be taxed in the hands of the recipient at their income tax rate.
• There is flexibility to distribute income (including income with certain characteristics – eg franked dividends) to any one or more beneficiaries (subject to personal services income and Part IVA issues) – restricted to the specified percentage for each class.

50% DISCOUNT		Available
	50% ACTIVE ASSET REDUCTION	Available
	15 YEAR EXEMPTION	Available (if there is a significant individual1 throughout a total of 15 years)
	RETIREMENT EXEMPTION	Available (if there is a significant individual1 in the year of disposal)
	ROLL-OVER	Available

Note : the availabililty of CGT concessions only relates to the availability to the structure. Consideration must be given to the requirements for accessing the concessions outlined in ITAA 97, and the requirement to distribute amounts of net capital gains in circumstances to aviod the benefit of the concession being eroded by the gross-up rules in sub-divison 115-C of ITAA 97.

• The assets of the structure are not owned by any one beneficiary and do not form part of a beneficiary’s estate upon their death.
• Ultimate control of the trust resides with the appointor.
• Ultimate control of the structure may be planned by appropriate drafting of the appointor provision.

• Beneficiaries may be added to the structure. Adding beneficiaries may cause a resettlement with capital gains tax and stamp duty liabilities.
• The structure is not capitalised by beneficiaries.

• Although families’ proportionate interests through the classes may be changed, it is difficult to introduce new families into the structure.
• There may need to be a family trust election if:
  • a beneficiary is to receive the benefit of franking credits attaching to dividends paid in respect of shares acquired after 31 December 1997; and
  • the beneficiary will have greater than $5,000 in franking credits (in total and from all sources) in the applicable financial year.