Trust Cloning for CGT
Trust cloning — creating a new trust with the same terms as an existing trust and transferring assets between them — was a commonly used CGT planning strategy. The dedicated exemption was repealed in 2008, but residual opportunities remain in specific circumstances.
Post-2008 trust cloning — what remains available
Trust cloning involves creating a new trust (the “clone”) with substantially the same terms as an existing trust and transferring assets from the original trust to the clone — separating assets between two structures. It was commonly used to allow co-investors to each hold their interest in assets in separate trusts.
The dedicated CGT exemption for trust cloning (former section 104-195 of the ITAA 1997) was repealed from 1 November 2008. After repeal, the Commissioner’s position is that most cloning arrangements trigger CGT — either CGT Event E1, E2 or E5 (absolute entitlement). However, residual opportunities remain in specific circumstances depending on the trust structure and the proposed steps.
- The pre-2008 exemption no longer applies — each proposed cloning must be analysed on its own specific facts
- Unit trust cloning may be analysable differently from discretionary trust cloning
- Rollover alternatives may achieve a similar outcome — small business restructure rollover (Subdivision 328-G), Subdivision 124-M
- A private ruling application before implementing any proposed cloning is strongly recommended
- MGS Private advises on the specific facts of each proposed cloning arrangement and whether CGT can be avoided
Post-2008 Options & Alternatives
What is still available and how MGS Private assists
Considering a trust cloning or asset separation strategy?
Get specialist advice before proceeding — the CGT consequences of getting it wrong are significant and difficult to reverse.