I am currently in the process of setting up a Discretionary trust with corporate trustee.
I am just wondering if it is worthwhile listing the company as a beneficiary to keep tax to a max of 30%?
Or when the company pays out the dividends the dividend is franked so if you are still in the top tax bracket you will then have to pay an additional 17.5 % on it anyway through your income tax return which would therefore make it a waste of time?
What are peoples thoughts on this?
You should have your deed worded so that any company in which you are or were a shareholder or director or office holder is a beneficiary. Not necessarily just the trustee. Its probably not a good idea to distribute to the trustee anyway because if the trust is sued the trustee will be liable.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:Not necessarily just the trustee. Its probably not a good idea to distribute to the trustee anyway because if the trust is sued the trustee will be liable.Agree with Terry. I persaonlly think that the trustee company should act SOLELY as trustee, and not receive any distributions. I would incorporate a new company for receiving any distributions.
Thanks for the replies,
Just trying to find the best way to get my structure setup the first time.
Agree with you on that as I did think that having the company also as a beneficiary would open up any assets passed through to it for prosecution.
But is there any point having a company as a beneficiary if it is just going to pay franked dividends out to the shareholders (eg me and my partner) and then we will just be paying extra tax if we are on a higher tax bracket? It seems if we are a beneficiary of the trust and the money just gets passed through to us we will be paying the same amount of tax anyway.
Correct me if I am wrong so is no point having a company for tax minimisation as a beneficiary?
Cam
Yes, there is still a point to have a company as a beneficary as hte company will pay a top rate of tax at 29%. It can then hold on to this for years and re lend to the trust or distribute to you later when you are on a lower tax rate.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
It’s worth noting that utilising a corporate beneficiary can be dangerous if not done correctly.
You’ll need to speak to an accountant to make sure you don’t get caught by Div 7A. Distributions made from a trust to a company beneficiary can be deemed an unfranked dividend. The company shareholder(s) can be assessed on the whole distribution, and will lose the benefit of any franking credits meaning you’ll have to pay the full 46.5%!
Hi Cam,
You should sit with an accountant who can talk you through the structuring side of things. Just quickly. You have a corporate trustee for asset protection, it should be a $1 company and that is all. You will need to have another company to distribute to as a beneficiary for tax purposes. The Benefit of this is keeping your tax payable within the 30% bracket. The company pays the tax and can pay you a dividend each year that is fully franked out of the profits provided you are within the 30% bracket yourself, otherwise leave it in the company.
Hope this helps.
Brad
Callaughan Partners
Accountants & Business Advisors
You must be logged in to reply to this topic. If you don't have an account, you can register here.
