Your business or businesslike activity is managed by a trustee for the benefit of others (the beneficiaries)
A trustee is responsible for dealing with the trust, including lodging returns, distributing income or losses to the beneficiaries, and is also responsible for overseeing the payment of debts.
Using a trust structure means that a business or businesslike activity is held and controlled by a trustee for the benefit of others (the beneficiaries).
A trustee is responsible for everything in the trust, including income and losses, and must report income in a trust income tax return.
Tax File Number (TFN): A trust needs its own TFN.
A trustee can be an incorporated company or a person.
Key facts for trusts
- Cost – higher cost to set up
- Setting up process – complicated
- Responsibility for business decisions – trustee
- Responsibility for debts – trustee
- Report business income – on trust income tax return
- The money you get from the business – as a beneficiary, you report any distributions on your individual tax return (if you’re the trustee and there is net trust income, you’re taxed at the highest marginal tax rate)
- Tax rate – depending on the trust deed, the trust may need to pay at the company tax rate. If all income is distributed to adult beneficiaries who
- are Australian residents, the trust doesn’t need to pay tax.
- Business Tax file number (TFN) needed – yes
- Additional administration – the trustee is responsible for formal deed and yearly administrative tasks
- Additional reporting – yes, the trustee is responsible for annual company tax return and other requirements
- Separate bank account – yes
Click here to find out more about Trusts.