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The ATO estimates that there are over 1 million trusts existing in Australia. Have you been thinking about future-proofing your finances for generations to come? Perhaps you have thought about setting up a Trust, but are not exactly sure what it is, or the process involved. Trusts can be set up for businesses or families. Let’s walk through the information together, so you can get some peace of mind that your family’s future is in safe hands.
Let’s start at the very beginning (as Maria said, it’s a very good place to start!). What is a trust?
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According to State Revenue Victoria, trusts are legal arrangements where a person or company (the trustee) holds property and the legal title to that property for the benefit of someone else (the beneficiary or unit holder). The Trust can also hold a variety of assets such as money, or an investment portfolio as well as property. There are 8 different types of trust structures in Australia.
Usually used for distribution of wealth amongst family members (although not limited to) for tax purposes. The trustee has discretion about how to distribute the assets held.
A predetermined entitlement that can not be altered by a trustee.
A type of fixed trust, where a beneficiary holds units (similar to shares) in the trust.
This is a trust which is set up as part of a Will. The Testator (the person who set up the trust) decides the terms of the trust, who are the beneficiaries and when the assets will be released.
A mixture of both discretionary and fixed trusts. A trustee has some input to the distribution of assets, but not all.
This trust allows charities to use the funds or assets put aside by a trustee. This also allows the trustee some tax incentives.
A trust that is set up for retirement. All superannuation in Australia is held as part of a superannuation trust.
When a trustee holds an asset on someone else’s behalf, the beneficiary.
Rather than shareholders a trust has beneficiaries. Beneficiaries could include family members, board members, friends or even another company. These beneficiaries are entitled to distributions of capital and income. Trusts are usually used to protect assets for their beneficiaries, and generations to come, with their main purpose being to allow wealth to be distributed. This is at the discretion of the person who set up the trust, or the trustee.
There are also some tax advantages to holding a trust. This is dependent on the type of trust, so please talk to us in more detail about how this could be an advantage for you.
Trusts can be valid for up to 80 years in most states of Australia (All except South Australia). In most cases, trusts vest (all assets distributed) up until a specific event. Eg a birthday or someone passes away.
Setting up a trust does require a certain skill set and knowledge of the parameters in which a Trust can be set up legally. It is also worth noting that the management of a trust is ongoing. That is why we recommend our clients utilise our full range of services when it comes to trusts. Accounting and administration tasks are required, as well as lodging tax forms and arranging stamp duty papers. Here at Profit First Accounting we can handle all of this for you.
If setting up a trust, whether it be for family or business asset protection for the future, you can rest assured we are experts in this field. Get in touch with our team today.
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