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The transferor trust measures do not apply to an individual who has transferred property or services to a non-resident family trust. However, the trust must be a non-resident family trust at all times when it is in existence after the beginning of the transferor's 1990-91 income year until the end of the current income year - that is, the income year for which the transferor is working out assessable income.
An exemption from the transferor trust measures is also available to an individual who:
- first becomes an Australian resident after 12 April 1989
- makes a transfer to a non-resident family trust before taking up residency in Australia.
To qualify, the trust estate must be a non-resident family trust at all times after the transferor becomes a resident of Australia.
The exception does not apply to an individual who, as trustee, transferred any property or services to the non-resident family trust from any other trust estate.
Two types of non-resident family trusts are covered by this exception - post-marital family trusts and family relief trusts.
Post-marital family trusts
Post-marital family trusts come into existence after a decree or order of dissolution or annulment of a marriage or a decree or order of judicial separation or similar instrument. Trusts resulting from the breakdown of a de facto marriage also qualify. The beneficiaries of the trust estate must be non-resident individuals and:
- the spouse or former spouse of the individual, or
- a child of the individual or the individual's spouse, or
- a child of the individual's former spouse during the marriage.
Family relief trusts
Family relief trusts are established and operated to help non-resident family members. Trusts with Australian or non-family beneficiaries do not qualify as family trusts. The only beneficiaries permitted are non-residents who are related to the transferor. The following persons are treated as related to the transferor for this purpose:
- a spouse or former spouse
- a parent of the transferor or of the transferor's spouse or former spouse
- a child of the transferor or of the transferor's spouse or former spouse
- a grandparent of the transferor
- a grandchild of the transferor
- a brother or sister of the transferor or of the transferor's spouse or former spouse
- a child of the transferor's brother or sister
- a child of a brother or sister of the transferor's spouse or former spouse.
A trust estate will generally not qualify as a family trust if the assets of the trust are excessive given the requirements of the beneficiaries. There is an exception to this rule, however, if there have been no transfers of property or services to the trust after 12 April 1989. In this case the trust can have excessive assets and still qualify as a family trust.
Last modified: 05 Dec 2006QC 18000