What is a family trust?
A family trust is a structure where the beneficiaries are predominantly family or related family members. There are many factors that you should consider before choosing a trust structure, however, we have outlined some key considerations below:
Firstly, your trust will have a trustee. The trustee has discretion over which beneficiaries get which distribution of income or capital of the trust. Your trustee can be a company or individual/s. The trustee owns the assets of the trust and distributes profits each year, to various family members with a common purpose. The common purpose may include minimizing the total income tax paid on the trust’s net income.
Secondly, your trust does not pay tax. The individual beneficiaries are responsible for paying tax on any income that is distributed to them.
Thirdly, running your business through a trust structure requires a separate set of accounts for the trust and you must submit an annual tax return for the trust. This is an additional business costs that you should factor into your decision making.
Lastly, your family trust can operate for up to 80 years. The day your trust ends is referred to as its “vesting day”. On this day your trust’s beneficiaries become entitled to the whole of the trust fund. Until that day, the trustee holds (and controls) all assets in the trust.
Read this article to identify some of the other key benefits and risks associated with running your business through a trust structure.
Setting up your trust is quick and easy, and does not need to cost a lot. However, as with any financial decision, obtain professional advice before committing to a trust structure.
All Sorted Business Services is a registered Australian Securities and Investment Commission (ASIC) Agent. Therefore, we are able to create companies and trusts for you and act on your behalf with ASIC. If you have questions please contact us at any time.
* Please note that the discounted setup rates shown apply for All Sorted bookkeeping clients only.