Trusts – Discretionary

What is a Trust?

A trust is a relationship of “trust” in which a person (“trustee”) is the holder of an interest in property but is subject to an equitable obligation to use or keep the property for the benefit of another person (“beneficiary”) or for some commitment object or purpose.

In a discretionary trust, the trustee is able to exercise discretion as to who is or are the beneficiaries to be beneficial and what proportions of the trust fund or trust income they are to receive.

We can assist

• Instruct lawyers to draft the Trust deed. (Discretionary).
• Establish a trustee.
• Register ABN.
• Register for GST (if applicable).
• Register for PAYG (if applicable).

Advantages

• With a corporate trustee – limited liability.
• Asset protection – Assets sheltered within the trust.
• Flexible tax planning with ability to distribute income and profits to family and other entities.
• Distributions from trust do not attract workers compensation, payroll tax and SCG.
• Capital gains tax discounting flow through to beneficiaries.
• Can distribute to a Company utilising the Company tax rate provided used correctly

Disadvantages

• Cost of maintenance.
• Changing legislation.
• Beneficiaries have a right to demand payment of all distributions made.

Compliance Requirements

• ABN registration.
• Tax File Number registration.
• GST registration (if applicable).
• BAS – monthly or quarterly.
• Tax Return – Yearly
• Financial records – Financial accounts balance sheet and profit and loss statement.

General Comments

Most businesses which use a Discretionary Trust is either after asset protection and require the flexibility of distributing to various different entities to minimise their income and capital gains tax. Typically when the threshold of all beneficiaries are utilised fully the larger businesses typically run through a Company structure to take advantage of the Company’s flat rate of tax.

Discretionary Trusts can also be used to accumulate assets and to keep the assets separate from the Trading Company / second trust that is a trading entity.