Hey guys,
Does anyone have advice regarding loaning shares held in a personal account to a Discretionary Trust/company to benefit from tax-efficient income distribution and asset protection?
From the internet "Using a loan instead of a direct transfer allows your business (company or trust) to control and benefit from the shares while avoiding a CGT event in your personal name. Instead of selling the shares to the business (which triggers CGT), you loan the shares to the business under a formal loan agreement"
How This Works (Step-by-Step)
- You Set Up a Loan Agreement
• Instead of transferring shares directly, you “loan” them to your business.
• This is done through a legal loan agreement, which specifies:
✅ The shares remain your property but are held for the business.
✅ The business can receive dividends and vote on company decisions.
✅ The loan may have a repayment schedule (or remain interest-free if allowed).
The Business Uses the Shares for Its Benefit
• The business can earn dividends from the shares.
• The business can sell the shares in the future if needed.
• The shares are recorded as a loan liability in the business’s books.No CGT Event (Because You Haven’t Sold Anything)
• Since you haven’t “disposed” of the shares, the ATO does not treat this as a CGT event.
• You defer CGT until an actual sale happens in the future.Future Scenarios
✅ You Keep Ownership → If you want the shares back, you simply end the loan agreement, and the shares return to your name.
✅ The Business Buys the Shares Later → If you later decide to transfer ownership, the business can purchase the shares from you when CGT is lower.
✅ The Business Pays You Back Over Time → If structured as a loan with repayments, you can slowly receive payments tax-efficiently.
Key Benefits
✅ Avoids CGT Now – Since you haven’t technically sold the shares.
✅ Flexibility – You can decide later whether to sell, take them back, or let the business buy them over time.
✅ Tax Efficiency – If the business earns dividends, it may pay a lower tax rate than you personally.
✅ Asset Protection – Shares are held for the business, reducing personal liability risks.
Potential Downsides
❌ Legal Complexity – You need a proper loan agreement to ensure it’s compliant.
❌ ATO Scrutiny – If the business benefits from the shares but doesn’t actually repay you, the ATO may question the arrangement.
❌ Dividends Might Be Taxed Differently – If dividends are received by the business, they may be taxed at the corporate tax rate (25-30%) rather than your personal tax rate.
Who Should Use This Strategy?
✅ If you want business control over the shares but don’t want an immediate CGT bill.
✅ If you think your tax rate will be lower in the future (e.g., after retirement).
✅ If you want to delay the sale until a better tax strategy is available.
✅ If you are structuring a trust or family wealth transfer and need flexibility.
Does anyone have any experience with this or have any advice?
Thanks in advance.
Real world worked out examples of how much you can save with all this effort?