Trust, unlike company, is not a separate legal entity. It is a relationship where the trustee is responsible for administrating and holding property for benefit of the beneficiaries. It is a legitimate tax structure to minimise tax in Australia.
The person who establishes a Trust is called the Settlor and usually will be a lawyer or an accountant. They do not have any other role or involvement in operating the Trust and can’t benefit from it.
The trustee(s) may be an individual or a company and is the legal owner of the assets in the trust. Hence, they can control and make decisions in relation to all these assets and distribution of capital and/or income generated by them.
An example:
The high income member of a family is the trustee of its Discretionary Family Trust. This person legally owns and manages all the trust assets. The income generated by these assets (such as interests on savings, share dividends, rental income etc), however, can be distributed to lower income earners in the family and therefore, pays tax at a lower rate or occasionally no tax.
Discretionary Trust is also very popular to businesses due to its flexibility in capital and income distribution, and its offer for asset protection. (Trust properties are generally protected as beneficiaries don’t own assets in the trust.)
Another advantage of trust is its entitlement to 50% Capital Gain Tax (CGT) Discount while company doesnot.
Setting up a Trust is generally not as time consuming and less costly (from $100) as comparing to company (from $500). If all necessary information is provided, a Trust can be set up immediately as required.
With our dedicated and highly experienced team, AATH Accounting Services can help you to set up the most effective tax structure and reach whatever goals you are aiming for.
Call us on (08) 8123 7459 or email admin@aath.com.au to schedule an appointment today!
* The information contained in this site is general and is not intended to serve as advice. AATH Accounting Services recommends you obtain advice concerning specific matters before making decisions.
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