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Benefits of Setting Up a Family Trust in Australia
June 21, 2022
Olivia Smith
Family Trust Australia

Family Trust Australia explained

The body has no legal existence. Instead, it is a discretionary body. It means a Family Trust Australia comes into existence when a person interested in the affairs of a family proposes to set up such an organization under the leadership of a trustee.

In most cases, the proposer happens to be the legal solicitor of the family. He or a senior member of the family nominates a trustee and appoints him or her in the portfolio once the person agrees to assume the responsibilities of managing the trust.

The trust deed provides the guideline for managing the trust. A legal expert prepares the document.

Though a Family Trust Australia is not a legal entity, the Australian Taxation Office considers its existence. The organization needs to apply for a Tax File Number with the ATO and need to submit Annual Tax Returns.

 Family Trust Australia advantages

Tax benefits from Income and Capital Distribution

Family Trust Australia gets lower tax obligations under the Aussie legislation. However, ATO does not impose a tax when the Trustee could successfully allocate the income among the beneficiaries. Instead, it imposes a tax on the beneficiaries based on their applicable rates. It saves a great deal in keeping the tax payable amount within a desirable range.

Trustees assign more funds to beneficiaries whose personal tax limit stays at a lower level.

This also enables the trust to save a great deal on payables in the Income Tax account.

 Capital Gains Discount

Companies and trusts need to pay Capital Gain Tax from the proceeds available from selling tangible assets that the company owns. Family Trusts in Australia enjoy a 50% discount on this account.

 Protection of Assets

Under the prevailing Australian law, no creditor can touch the assets of the debtors when these are under the hold of a family trust. The clause is applicable for whatsoever time the credit amount remains unpaid. The condition keeps valid even if the debtor becomes bankrupt. Many companies in the country have saved a deal on their assets by taking refuge in this clause in Aussie rules.

 Straightforward Compliance

Submission and amenability relating to Family Trust Australia are much less than companies. Beneficiaries report trust distribution on their tax return and pay tax at their personal tax rate. The procedure takes much less time to comply with. The entire process thus is much simple and faster.

 Final Realization

From the above discussion, it is evident that the Trustee in Family Trust Australia requires distributing profit every financial year to avoid paying tax at the highest marginal rate for the amount left undistributed.

The last February, the ATO has come up with new regulations in this regard. It states that the trusts will have to pay 47% of the undistributed income or capital gains. With such changes, the organization feels more of appointing a regular legal consultant to handle the legislative nooks of the trust.