I heard a comment from Steve recently (I think on a tape) that you don’t actually have to pay out the distribution from a family trust to the beneficiaries, it can be retained within the trust (via loan statements?) somehow…
Would someone please explain how this is done, and if the funds are then available for further property investing!!
Hi Tas Investor,
We’re out here and we’re waiting too![]
I’d Like to hear about this too, as we’re just forming a trust now and this sort of info would help us too.
We would like to keep profits in the trust and use them to reduce the trustee’s debts.
Cheers,
Scott
“Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
-anon
Stu is correct in that, under Australian tax law, any undistributed (ie. retained) income in a trust structure is taxed at the highest marginal income rate (currently 47% + 1.5% Medicare Levy). In this case the tax is paid by the Trustee out of trust funds.
Really then, there seems to be no benefit in holding funds back, except perhaps with any superannuation surcharge issues if individual beneficiaries are close to that particular threshold (see an accountant for more on this matter).
While you need to be very careful with anti-avoidance issues, provided there is a valid reason for establishing a company you can have that as a ‘corporate beneficiary’ and then limit the maximum amount of tax you pay to 30% (the company rate).
As always, it is critical that you seek tailored financial advice for your specific circumstance.
What I would strongly recommend is that people who want to know more about structuring seriously think about buying the WealthGuardian product that was recently released. To find out more visit: https://www.propertyinvesting.com/resources/11
Bye,
Steve McKnight
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Remember that success comes from doing things differently.
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I think you are commenting on the fact that once the funds are disbursed, that the beneficiary loans the money back to the trust and that this is just an accounting record. I believe the beneficiary can recall on those funds however at any time (not sure if a loan agreement can get around this). I have set up a discretionary trust, it has a corp beneficiary (for tax at 30%) as well as family members (including myself) and I can distribute funds from the coprorate trustee (yep another company) as I see fit.
Stu and Steve are spot on, that much I know, but im still learning. In fact my accountant is coming in Monday to ensure my comfort with it. A trust isnt set up to make money, its purpose is to invest and protect assets under a separate legal entity. Tax benefits?… makes little difference if none at all. I set up the trust to guarantee a disconnect between income earned and asset wealth.
I recently was surfing another forum and there was a post recommending your Wealth Guardian product. But somehow the web address had been censored out. Even your name was censored to Steve xxxxx. Isn’t that funny?
futher to steve’s reply is that once you have funds in your corporate benificiary and paid tax @ 30% you then are only holding the funds. If you want to distribute from then on ,you can pay franked dividends to the share holders or wages to the employees if it is a trading co.If it is a trading co then the funds can be spent on deductable expences and on it goes.
The structures that exist allow for different outcomes. what outcome you wish for will depend on your structure.
One of the most important things people overlook is the fact that TAX needs to be paid in order to have real net wealth.
Cheers
Rob
“Every family is born with a father as the banker.
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