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TRUST TAX RETURN

TRUST IS A GREAT STRUCTURE FOR ASSET PRESERVATION & TAX DISTRIBUTION EFFICIENCY

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We can help to minimise your trust tax return to nil by distributing trust income and tax effectively.

Purpose of a trust

A Trust structure is widely used for investment and business purposes. The trust’s objective is to provide a way for a person to pass on their personal and or business assets to specific beneficiaries while safeguarding those assets from creditors.
 

What is a trust?

A trust is not a separate legal entity. It is a structure where a trustee carries out the business on behalf of the trust’s members (beneficiaries). A Trustee can be a company or an Individual. A Trustee is legally responsible for a Trust’s debts and may use Trust’s assets to meet those debts; and or any shortfall. For tax administration purposes, a trust is treated as a taxpayer entity and lodge a trust tax return.
 

Types of Trusts

 
    1. Family Trust

A Family Trust is a common type of trust used to conduct a small family business or hold assets. A family trust is an Inter Vivos discretionary trust which means it is set up by a person to transfer or gift assets or investments to support specified beneficiaries. 

 

    1. Fixed Unit Trust

Also known as a fixed trust, this type of structure divides assets into units, pretty much like shares in a company. Unlike a discretionary trust, the fixed unit trust structure does not give the trustee the discretion to decide how income and assets are distributed.

 

    1. Hybrid Trust

As the name suggests, a Hybrid Trust is a cross of both Family and Unit Trusts. This structure is quite useful as it has characteristics and benefits of both. This structure is often employed when significant assets are involved. A hybrid generally has income and capital gains tax benefits.

Lodge Trust Tax Returns Online

In order to lodge a trust tax return a trust must have a Tax File Number and Australian Business Number to lodge a trust tax return online, and must declare all of the following: 

      • Business income, including rental income
      • Business Deductions
      • Distributions made to beneficiaries

Trust tax payable

Generally a trust does not pay tax if all income has been distributed to adult beneficiaries. If there is trust income to which no beneficiary is presently entitled, a trust may pay tax on that undistributed income at 45%

Trust income distribution to beneficiaries

A trust lodges a trust tax return and distributes its net income to beneficiaries who are presently entitled to income and or capital. 

Net income distributions are controlled by the trustee. 

Each beneficiary pays tax on the share of Trust’s net income and applicable franking credits distributed by the Trust on their personal tax return at individual tax rates

Difference between a Trust Income and Net Income

      • Net Income of a Trust is the Taxable Income (Assessable Income – Allowable Deductions). It worked on the assumptions that a trustee is a tax resident (even if the trustee is actually a non-resident for tax purposes). The Trust Net Income is determined in accordance with the tax law.
      • Trust Income: Income of a trust is determined by the Trust Deed.
Both of the Net Income and Trust Income often differs.

Trust Deed

Managing and setting up a trust can be complex. Formal Deeds are required to set up correct types of trust and there is administrative work that must be done annually. The Deed outlines how the trust will operate. Contact us to help you set it up with ease.

GST Registration for Trust

GST must be registered if a trust’s:

      • annual turnover is more than $75,000, or
      • a non-profit organisation and your turnover is more than $150,000,
      • when you start a trust and expect your turnover to reach the GST threshold (or more) in the first year of operation.

Setting up a trust in Australia

If you’re considering setting up a Trust to preserve asset(s), we can provide concrete advice on the pros and cons and whether starting a trust is the right choice. We’ll be with you at every step.

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