Family Trusts (Discretionary)

This is the most commonly used structure for holding & transferring wealth as it has many benefits:

  • Minimising Tax – Income that is generated in a trust can be distributed to family members of choice. For example, you could distribute dividend income from shares to a family member who has no income. This means that you can fully utilise the tax free threshold (& the franking credits will be refundable) rather than having additional income at your own marginal tax rate.
  • Asset Protection – The assets are not held personally by you but are actually owned by the trustee of the trust for the benefit of the beneficiaries.
  • Estate Planning – It is easy to change the control of the assets as you may change the trustee. This is especially useful when dealing with illiquid assets such as property.

It would be worthwhile to review your investment structures as there are a variety of factors that would determine whether setting up a family trust would be appropriate for your situation.

An Example

We had a new client that was poorly structured for tax and had owned 4 positively geared properties in his own name as he did not seek nor receive any advice from his prior accountant. This was extremely tax inefficient and was reducing his earnings significantly as he was on a high-income tax bracket. We outlined that with proper tax structure, he would have been able to generate tax-free rental income as he had eligible beneficiaries that were able to receive trust distribution income. As property is a highly illiquid asset, restructuring will be costly and will be time intensive i.e. stamp duty, legal fees & capital gains.

Tax planning is unique for every client as it depends on the asset classes invested, family situation and goals. We stress that it is much easier to optimise the tax outcomes upon setup rather than to restructure afterwards.

There are also many different types of trusts & situations in business operations where it may be appropriate to use an alternate structure.

Book in a complimentary discovery call with one of our client managers to discuss business solutions.