Hi, I couldn’t find this topic anywhere..
What are the advantages of using a trust/company to get a better tax rate if it has to be taxed again at your personal rate before it gets in your own pocket?
am I missing something.[?]
isn’t this getting taxed twice?
thanks
Dan
Dan,
Trusts
Very broadly, the trustee of the trust allocates income to its beneficiaries. The trust only pays tax if income is not distributed (this would be an uncommon scenario). No tax on the trust for income that is distributed to the benficiaries.Once the income is distributed to the beneficiaries, it is then taxed at the relevant individuals’ marginal tax rate. There is no double taxation.
Company
The 30% tax rate is based on net profit – after all relevant deductions, including income, that may be distributed to directors and/or employees.
Those individuals’ incomes are then taxed at the marginal rates as above.Trust this clarifies.
James
Thanks, my understanding was not correct. [^]
I was also under the impress Trusts were used for tax savings, however I guess they are really only for asset protection?
Also, if people are recommending to have a company the beneficiary of a trust, I assume again for tax savings, how are your assets protected if the business my company owns is sued? Or are people recommending to setup yet another company (separate to my business) purley to be the beneficiary of the trust? and is this even legal?
your help appreciated again.
thanks[
]Dan
Dan
Trusts are tax effective – eg. you can distribute the income to family members not working and pay no tax.
Having a company as beneficiary is not problem, the beneficiaries cannot be sued. If you meant trustee, having a company has added protection, but you should not have a trading company as trustee. It is better to set up a new company for this.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry.
So please just confirm one last thing.
I have a trading business and want to setup a trust for my investments.
I am still confused as the best way to go incorporating my trading company and the trust.
Should I make the trading company a beneficiary of the trust? Or should I setup another shelf company and make
it the Trustee of the trust or the beneficary of the trust?Sorry for the dumb questions,[:p]
thanks again
Dan
You had better talk to an account about transferring you business to a trust as there would be capital gains issues.
But I would think one way would be for teh trust to hold the shares in company.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Dan
You would be wise to set up a separate company to be the trustee of your trust. This company, and your trading company can both be beneficiaries (in fact, your trust deed should be broad enough to include all companies you or other named beneficiaries are director of).
You can choose to give the income to any of the beneficiaries, which will give you a lot of flexibility in terms of taxation.
Cheers
Melthanks once again.
I hope one day I can help you once I gain more knowledge.[^]
Dan
]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
