Asset protection and Tax minimisation via Family Trust

1, anyone. Even future people – those not yet conceived. You do this by the wording of the deed. any children, step children, adpoted children of x. etc. The only condition is that they have to clearly fall within the definition in the deed so they can be identified for certain..

2. yes, but there are special rules with dividends.

3. would be better from an asset protection pov to separate them up. don't have all your eggs in one basket. May be tax advantages too.

If you want to loan your trust money you should do it properly with written loan agreements.

For borrowing purposes spouses can usually guarantee for the other spouse. If you a using a trust  lenders will ask each trustee and/or director to guarantee. If your non working wife is sole director then you may have to offer yourself as a guarantor too.

for serviceability purposes guaranteeing a loan is the same as taking a loan in your personal name. So if you cannot qualify for a loan in your own name you won't qualify by using a trust.

If you want to know the legal aspects of a trust then talk to a lawyer, tax aspects then to your tax advisor.

Hi all,

Very interesting forum! I have one question. As per my previous question whether I could transfer my own home to make it an investment property and reading that that is not possible, what if you have a family trust? Can you transfer your home to it and rent it out through the Trust then any profit made, couldn't you distribute it to the different members of the family trust and therefore reduce your tax?

Sam

You could sell your house to your discretionary trust. Any profit would then be able to be disributed to a wide variety of beneficiaries and it could potenitally save you tax.

Down sides are you will pay stamp duty and your property is likely to be cashflow negative. Losses of a trust cannot be used to offset personal income. You may also pay more land tax in NSW.

My partner and I have just started a discretionary trust with ourselves and our daughter as beneficieries. We have started a business and the income from my husband's share of work in a newly signed contract would otherwise be second income for him and attarct the highest tax rate. I work as a principal in the business but as yet have not brought in any of my own clients (though hope to change that soon!). It cost us $550 for the legal documents to be drawn up and accountants initial advice and that is much less than the tax which would have been due on the first month's work if it was not paid to the trust so I am very happy.

As for buying IP, our accountant seems to think it is better bought in the name of  the highest tax earner if it is negative geared, although I admit I was having trouble focussing by the time we got to that part !

Like Terryw he explained that the trust does not pay tax unless the profits are not distrubuted, it is the beneficiaries that pay tax after receiving it into their own taxable income (including the cat?).

However, what I am not clear on is if, say, a trust has several assets and/or income streams, can they be offset against each other. Total income + gains against total expenses + losses from all sources equals profit to be distributed? If that is the case it seems like it can be very flexible with the right planning.

Thank you Terry

I'll make a note to take to next meeting with accountant.