What is a Trust?
A Trust is a structured relationship between trustees and beneficiaries. It is recognised by the courts and its terms & conditions are legally enforceable. Trusts are usually established for the purposes of handling investment income/losses/capital distribution, tax planning, tax minimisation, succession/estate planning and related matters. They are not to be confused with Companies which are legal entities. Trusts are predominantly used for asset protection. If you are looking for business related structures to limit your personal financial and/or legal liabilities, visit our section on Company Setup for more information.
Who are the Trustees and Beneficiaries?
Trustee is the person who administers the property/assets held within a trust for the benefit of a third party being the beneficiaries, and beneficiaries are the receiving parties in this relationship. Trustees can be an individual, a group of individuals or a Company. They are obligated to use the property held within a trust exclusively for the benefit of the beneficiaries. Income/losses/capital relating to the withheld property are distributed to the nominated beneficiaries in accordance with theirs rights and entitlements. The appointers of trusts play a crucial role because they can appoint and remove trustees as they see fit.
Trusts are commonly established to handle family financial affairs, business, charity and/or investment matters; providing more options & flexibility in tax planning and tax minimisation strategies.
These are the different types of trusts in Australia:
- Bare trusts
- Charitable trusts
- Discretionary trust
- Fixed trusts
- Hybrid trusts
- Superannuation trusts
- Testamentary trusts
- Unit trusts
Each trust is uniquely structured to reflect the trustees’ intent. It is important to note that different trusts carry different legal responsibilities and establishment & operational costs. Having the opportunity to utilise a tax effective vehicle such as a trust in Australia has many advantages and disadvantages. Having a correctly setup tax structure for your investments and/or business can mean the difference of saving thousands of dollars each year and more importantly protect your valuable assets.
At C Advisory, we specialise in identifying tax structure/s that are most suitable to your unique circumstance. If you are unsure if you can benefit from using a trust or whether you have the correct tax structure setup, call us today for a private discussion with our experienced accountants.