Family Trust

A family trust is a type of discretionary trust and is commonly used in Australia as a trading vehicle for carrying on of a business.

The business is either carried on by individuals or a limited company acting in the capacity as trustee of the family trust.

A discretionary trust can provide most flexibility in terms of the allocation of business profits with profits capable of being allocated or distributed between the beneficiaries generally spouses/partners and family members in an effort to reduce the overall tax payable.

Compared with other types of business structure such as a Pty limited company a family trust is more complex to administer.

The family trust business structure can also involve family trusts being involved as a partnerships of family trust.

If would like to consider establishing a family trust structure we at GM Tax can assist with the setting up of a family trust and ongoing support including:

  • Tax advice and guidance to ensure that a family trust structure is right for you and your business.
  • Obtaining a Tax File & Australian Business Number for the family trust from the Australian Taxation Office.
  • Registering a business name with ASIC.
  • Assisting with book-keeping, payroll administration, superannuation obligations and the lodgment of quarterly Business Activity Statements.
  • Preparing trust minutes, for example to record the distribution of trust income.
  • Preparing the annual accounts and the tax return for the family trust and trust beneficiaries for submission to the ATO.

However, such an entity can be subject to the personal services income provisions and such can markedly reduce the tax advantages of a family trust structure.

Personal services income (PSI) is income produced mainly from your skills or efforts as an individual, examples include income payable under a contract which is wholly or principally for the labour or services of a person, or income derived by consultants from the exercise of personal expertise.

The PSI rules affect how you report your PSI and the deductions you can claim.

Should the PSI rules apply to your business the structure may still be useful and you would actively consider having a corporate trustee (rather than you being a trustee personally) to provide a measure of asset protection for you.

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Please contact us at GM Tax to ensure you establish the business structure that is right for you and your business.

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