Our client is a well known family which features regularly on the BRW “Rich List”. Very active in philanthropy our client wished to establish a private charity, known as an Ancillary Fund, with an initial endowment of $30 million.
Complicating the issue was the fact that the client’s assets were shares in listed companies held in a family discretionary trust. Any transfer of these assets would be treated as a sale for capital gains tax purposes and would result in the trust deriving assessable capital gains.
The client sought our advice to assist in the establishment of the private charity and to provide taxation advice as to the best way to structure the transaction. Moser Bland & Co. developed a strategy which involved offsetting the $30 million tax deduction which was available from the transfer of assets into the private charity, with a grossed up fully franked dividend of $30 million, resulting in a $9 million tax refund for the client.
The transaction in its final form involved the transfer of $36 million in shares, the extra $6 million being required to negate the capital gain which arose on the transfer of the assets into the private charity.
Moser Bland & Co. project managed the entire process and sought expert advice from specialist trust and charity lawyers to ensure that the transaction complied with the relevant charity and trust legislation as well as the tax legislation.
The transaction from beginning to end took nearly six months and Moser Bland & Co. provided advice and supervision at every stage of the process including:
- Planning the transaction
- Providing tax advice for the transaction confirming the availability of tax deductions and compliance with all relevant tax legislation
- Implementing the structure including briefing specialist charity lawyers and reviewing trust deeds and related documents
- Preparing and lodging share transfer forms to transfer $36 million in shares into the private charity
- Ensuring meetings of trustees and directors were held and documented prior to 30 June to effect the transfers to the private charity and the crediting of $36 million in fully franked dividends
- Preparation and lodgement of valuation applications and related paperwork with the Australian Valuation Office
- Preparation and lodgement of income tax returns for our client to consummate the transaction
The transaction was structured and implemented in 100% compliance with the planned strategy. The client’s private charity was up and running with a $36 million endowment and the client received a $9 million tax refund.