Family Trust Account Australia - What is a Family Trust Australia - Family Trust Tax Benefits Australia

What is a Family Trust?

Family trusts, also widely known as discretionary trusts, represent a broadly utilized structure for business entities in Australia. Family trusts are often chosen because of the distribution of profits they effect while also facilitating the protection of assets via a corporate trustee.

How Does A Trust Become A “Family” Trust?

In a general sense, the family trust and the discretionary trust are one in the same thing. However, in terms of their tax treatment, generic trusts are not classified as “family” trusts unless a specific election is made.

Explaining The Family Trust Election

The “FTE,” or family trust election is a wise choice under any of the four following situations:

1. the trust will carry forward tax loss amounts
2. the trust has ownership of an entity with losses
3. the trust is receiving dividend franking credits
4. the trust regularly distributes to a different trust

Typically, an entity’s accountant will prepare the FTE for inclusion in the tax return for the year in which it is first made. In subsequent years, a disclosure will be added to the first page of the enterprise’s tax returns.

Operation Of The Trustee

Family trusts do not exist on their own, but rather require the existence of a trustee. In essence, the trustee assumes control over the trust itself. The person establishing the trust may serve as trustee, or a company can also perform this role.

It should be noted that a family trust is considered separate and distinct from an individual, provided there is a named trustee. The trust will have its own financial statements and is set apart from the person or entities in control of it.

Distribution Of Profits Through The Trust

For purposes of profit distribution, a trust works as something of a conduit. This just means that profits enter the trust during the course of a year. These amounts ought not stay in the trust once the fiscal year comes to an end, lest the trustee have to pay taxes on this income at the top marginal rate, which is 47% at present.

Prior to the end of the fiscal year, it is necessary to prepare a distribution minute which will be signed and used to disclose all recipients of trust profits for the relevant time period.

Possible Selection Of Income Classes And Beneficiary Designations

The deed of trust will determine whether choices of this nature can be made. If a trust’s deed provides for distinctions among income classes, there is no restriction on such action. It would then be possible to create separations into categories such as business income, capital gains, franked dividends, and miscellaneous income.

Should Business Partners Be Included In A Family Trust?

It is not generally advisable to include a business partner in the establishment of a family trust. Instead, it would be wiser to look into alternative vehicle. Unit trusts, company trusts or perhaps a partnership that joins family trusts would make more sense, provided that the latter is designed to operate under a series of clear rules that govern how the relationship will work in practice.

Book Your Free Consultation Today

To see how you too can benefit from working with us, request your FREE meeting today. Enter your details in the form below, or phone us direct on 03 9583 0550.

Arrange your FREE No-Obligation Meeting

Either call us on (03) 9583 0550 or complete the form below

Latest from our blog

I Can Predict Your Future

Posted: September 19 2018
Xero Banner

Success Accounting Group Pty Ltd

Oakleigh, VIC, 3166

5.0 stars

Reviews:

    Disclaimer: The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Therefore, before you decide to buy any product or keep or cancel a similar product that you already hold, it is important that you read and consider the relevant Product Disclosure Statement (PDS) of the product provider to make sure that the product is appropriate for you. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice. You can get a copy of relevant PDSs from Success Accounting Group by email Grow@SuccessAccountingGroup.com.au or by Phone (03) 03 9583 0550. All statements made on this website are made in good faith and we believe they are accurate and reliable. Success Accounting Group does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Success Accounting Group, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Success Accounting Group. You may not alter or modify this information in any way, including the removal of this copyright notice.

    Contact Us