1. Is a Trust part of your business or family tax structure?
Are you the Individual Trustee or the Director of the Corporate Trustee?
Yes – Some points below to consider
No – but you have considered it – Make an appointment to discuss prior to formation!
2. Do you have a copy of your Trust Deed?
With a valid executed Trust deed, certain obligations are required by the Trustee and certain conditions may apply to beneficiary of the Trust. For example – do you have a life interest in the Trust property or do you have a beneficial interest in the capital (corpus) of the Trust?
Does the Trustee make Trust beneficiaries presently entitled to Trust Income before 30 June?
Yes – Excellent, nothing further to do!
No – Keep reading
If you do not make a beneficiary of a Trust presently entitled to the income of the Trust, the Trustee may be assessed on the income and taxed at marginal rates (currently 47%).
How do you make a beneficiary presently entitled to Trust income – prepare a minute outlining the Trustees decision.
What do you do with this minute – keep it with the Trust Deed/Permanent records.
Why – because in the event of an ATO investigation (for any matter) – the investigator will want to verify the existence of this document.
What do I need to do as 30 June approaches – ensure this documentation is completed!
3. Does your Trust distribute to a company?
Yes – Keep reading
No – Do Nothing!
4. Do you pay out these funds in cash to the company?
Yes – Excellent, nothing further to do!
No – You may be subject to division 7A. Make an appointment asap!
What is considered Trust Income according to your Trust Deed, and is this the same as the taxation law definition of Trust Income?
Certain transactions like Capital Gains or Franked Dividends can sometimes not be considered Trust Income under the Trust Deed. Many have been updated to change the definition of trust income to be the same as tax legislation – however it is important to know how your Trust Deed treats these items.
5. Do you stream different types of income to different beneficiaries?
You may choose to make a company presently entitled to trading income, but an individual presently entitled to dividends (a compelling reason to do this might be that the individual has a lower marginal tax rate that the franking credits attached to the dividend). If your trust deed doesn’t allow for this, or you have not made the necessary election to make the different beneficiaries presently entitled to the various types income, the trustee may be assessed on the income and taxed at marginal rates (currently 47%).
If you are an individual trustee or a Director of a Corporate Trustee – do you have a clause in the Trust Deed that offers the Trustee indemnity?
Yes – Good, do nothing
No – Keep reading
6. What are the potential liabilities or obligations that the Trustee is exposed to?
Examples – breaking a commercial lease, trust is a trading entity, beneficiaries disputes.
We have just performed a preliminary review of your Trust, which covers some of the items above – if you are interested in finding out how your Trust performs against some of the common problems – make an appointment today.