After reading threads about trust structures, I have been considering setting up a Trust also. However, this morning I read in “Learn more about Family Trust’ by N.E. Renton, that under tax avoidance provisions, there is penal tax rate (apparently 66%)for distributions/investment income to minors. This is to avoid any undue tax advantages that might be gained from chanelling income streams to minors, using the trust.
In this case dosen’t the discretionery trusts losses some of its tax savings appeal. There is not much tax you can save between spouses considering the hassles of setting up the trust, legal cost, accountants cost, etc.[ohno2][thumbsdownanim
regards
Bid
Bid,
Firstly, Trusts are not purely for tax advantages – there are many risk minimisation rationales for their use as well.
Secondly there are other varieties of Trusts beyond discretionary. You need to look beyond that type.
Finally, think about it this way – you’re not going to stop accumulating assets are you?
Will a Trust be more valuable to you when you have 5 properties? 10? 20? 50?
Not if you don’t have it in place now!
Cheers,
Aceyducey
Bid,
I’ve read “Trust Magic” and it says yes any UNEARNED income your children might receive from the Trust will be taxed at the exorbitant rate if it’s over a cetain amount. But any EARNED income is not taxed until it meets the first tax bracket threshold etc.
Hence, I have made accounting records to pay my child for delivering flyers for the IP on her scooter, printing and folding flyers, doing things on the PC, tidying up the garden at the IP etc. Just make it reasonable.Have a read of the book, I am no expert.
skippygirl [biggrin]
Hi skippygirl
I agree that any earned income by minor would be taxed at marginal rates and this would be a good way of paying out profits to the minors. It may not be significant (as it would be hard to justify), nevertheless something is better than nothing.
Bid
And what about when those ‘minors’ become ‘majors’ and maybe going to uni and not earning any money = good beneficiaries.
You can also distribute approx $650 each year to minors without them paying tax. It helps if you have lots of kids!
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
How many kids you got Terry?[biggrin]
“If You never never ask, you’ll never never know”
Can the trust pay for the child’s expenses directly i.e school fees, contributions to a college fund (eg ASG), medical insurance, etc.
Would these direct payments be still treated as the child’s deemed income (minor or major) or would they be deducted as expenses incurred by trust and would reduce the income available for distribution to the beneficiaries.
Hope I am not embarking on a wrong tangent here.
Regards
Bid
I know a company can claim HECS debt as well as other education fees (upskilling employees)…
“It may not be significant (as it would be hard to justify), nevertheless something is better than nothing.”
Also as skippy girl mentioned thats for unearned income, simply make them do some odd jobs and then it’s normal tax scales which is- $0-$6K = 0% tax rate; $6K-$20K = 17% tax rate. Thats not too bad at all, all so this dosen’t inc. the new reduced income tax rates (thxs to this year budget – thankyou Liberal!).
Rgds.
Lucifer_auHeya… what’s the new taxation rate ?
Kev
There’s no Such thing as No Can’t Do!!!!!
The 2004–05 Commonwealth Budget will be released on Tuesday, 11 May at 7:30pm, so we won’t know the new tax rates untill then.
Rgds.
Lucifer_auGet the Kids working: Filing, tidying (home) office, producing mail merge documents, and putting together info packs for potential clients, Ya never know the kids migh learn something . think of it as a non financial investment into their lives
Originally posted by Terryw:And what about when those ‘minors’ become ‘majors’ and maybe going to uni and not earning any money = good beneficiaries.
You can also distribute approx $650 each year to minors without them paying tax. It helps if you have lots of kids!
Terryw
Discover Home Loans
North Sydney
[email protected]Hi Terry,
Could i use the family turst as a shareholder in my partnership pty Ltd (I have partnership Pty Ltd with my friens). them i can more effectively disturbute the dividend to my family members without hassle form ATO?[inlove][inlove][inlove]
all inputs are welcome [strum][strum]
Regards
Julian[worried]
THERE IS ALWAYS A BETTER WAY!
Julian
yes the trustee can hold shares in the company as trustee for the trust. So dividends will then pass to the trust. These can then be distributed to family memeber, but they will have to declare the income.
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
Good Morning,
Terry,
Usaully, in the Indiviual truest, the trustee and the appointor is the same person, but the beneficiary may be more than one person, if someday the appointor is gone before others, who has the right to appoint the appointor?All input are welcome.[inlove]
Julian [worried]
THERE IS ALWAYS A BETTER WAY!
Julian
I think I answered this one somewhere else too.
I checked with one of my trust deeds. My wife is Appointor, I am backup appointor and our kids can be appointers in the event that we both die. I am not sure what would happen after that.
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
Originally posted by Terryw:Julian
I think I answered this one somewhere else too.
I checked with one of my trust deeds. My wife is Appointor, I am backup appointor and our kids can be appointers in the event that we both die. I am not sure what would happen after that.
Terryw
Discover Home Loans
North Sydney
[email protected]Hi terry,
What i’m really concern is that if i’m the single appointor and trustee, there are four beneficiaries, of course i’m of the beneficiary, but if i’ve gone first, what will happen? do the remaining beneficiaries have the equal right to elect a new appointor? or the corporated appointor is better?
What do you think?Regards
Julian [worried]
THERE IS ALWAYS A BETTER WAY!
Julian
Have a look at your trust deed, it will probably specify what will happen if the appointer dies. I don’t think the beneficiaries would be able to elect an appointor.
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
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