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A little bit more on family trusts

August 31st, 2002

I meant to include this link in my earlier post on trusts and tax avoidance. When the article came out, I copped some flak over my suggestion that trusts were being used to hide assets in divorces. As was pointed out, the Family Court has some power to unwind trusts in divorces. Before reposting, I checked and found a publication entitled Anatomy of Trusts which says:

There are many reasons why family trusts have and may continue to be a popular
vehicle for conducting family businesses and investment strategies including:
(a) The tax effectiveness of the structure;
(b) As a means of protecting and preserving property from:
Ø The claims of creditors in bankruptcy;
Ø Disenfranchised family members in estate disputes;
Ø To a certain extent, estranged spouses in divorce (although as will be seen later, there is a limited scope of effectiveness best summarised by The Honourable Kay J. in his paper “Trusts: Setting One Up in the Light of the Family Court’s Powers”;
“So unfortunately those intent upon maintaining their asset structure after the breakdown of a marriage do have some potent and powerful weapons in their armoury. They must sacrifice real control, however, and must ensure there is no Achilles heel visible such as loan accounts or personal assets and they must be prepared to wear the stigma of bankruptcy in the event of a lump sum order being made against them.”

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  1. crunchycapitalist
    April 2nd, 2004 at 00:26 | #1

    Where can i find out some of the more blatant and outrageous tax avoidance schemes that were actually okayed by barwick’s high court in the 70s? what I’m most curious about is the mechanics of the schemes rather than the court reports.

    thanks

    julian

  2. John Quiggin
    April 2nd, 2004 at 08:24 | #2

    The best-known schemes were associated with the names “Curran”,
    “Slutzkin” and “bottom of the harbour”. Essentially, tax liabilities
    were dumped into straw companies which then went, metaphorically (and
    sometimes literally as far as records were concerned) to the bottom
    of Sydney Harbour. But there were many others.

    As it happens, Ken Parish has just done an extensive post on Barwick that may be of interest.

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