Hi,
Needing help on the following scenario.
A property was built 27 years ago and put into a discretionary Trust.
The property has never been used for income purposes.
It was never negatively geared, tax was never claimed on the property, the company did not ever have an income.
The entity was never intended to avoid, reduce or claim tax on.
The property has been lived in by the personal owners since and are now both pensioners - let's say person 1 and person 2.
No mortgage exists on the property.
When a mortgage did exist, it was under the company name with Person 1 as a guarantor and paid the interest.
The Trust has recieved no income, distributed no income etc.
Person 1 was self employed and earnt an income.
If a bill was received in the Trust name (for example $100.00), Person 1 transferred their own funds of $100.00 into the Trust account and then paid it - this includes the full mortgage that was paid from Persons 1 & 2 directly, not from income derived from a Trust.
Tax has never been paid from the trust, no tax returns have been required declaring income etc as no profit or income has ever derived from the Trust.
The two people who own the property are both trustees.
Person 2 on the trust is the appointer and primary beneficiary of the Trust.
The property satisfies all points of the Main Residence Exemption, though it's believed that CGT may apply when disolving the Trust and transferring the property into a personal or joint name (to Person 1 &/or Person 2) of which the property is/has always been the Principal Place of Residence and would always have satisfied the requirements for the Main Residence Exemption.
In this instance, would CGT still apply or would the Main Residence Exemption be able to take over?
Keeping in mind both parties are pensioners (Centrelink, not self funded/no super etc) and selling the house isn't an option (nor feasable as it's a very modest house/size of land). All they want to do is get rid of the Trust and as such, transfer the property into their own names to finalise their retirement without $150,000 of total costs which they don't even have 10% of.
If any further clarity is needed, please let me know.
Thanks in advance for the help.
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