A family trust, also referred to as a discretionary trust, is a legal structure created to hold assets and provide financial benefits to family members. It is established during an individual's lifetime to manage specific assets or investments while supporting designated beneficiaries. Properly establishing and managing a family trust requires specialised expertise and guidance, particularly from qualified accountants who are well-versed in Australia's tax regulations and structuring requirements. Anchoram Business Services team is well equipped to help you with exactly that.
Our discretionary trust services cover the full lifecycle and ongoing management of trusts, including:
Talk to our friendly team today about all your family/discretionary trust set up and accounting requirements
In Australia, Discretionary or Family Trusts are commonly used by business owners to protect family assets and facilitate tax planning. Trusts are widely used yet often misunderstood structures, particularly regarding tax implications. They allow an individual or company to hold and manage assets on behalf of beneficiaries, with a trustee controlling the assets according to rules set out by the settlor in a trust deed. Assets such as property, shares, and businesses can be held in a trust, and the trust mechanism gives you control over the distribution of income and capital.
From a tax perspective, a key benefit is that any income generated by the trust through business activities or investments—including capital gains—can be allocated to beneficiaries in lower tax brackets (often spouses or children). Since trustees have the discretion to distribute income and capital as they see fit, and beneficiaries do not have a fixed entitlement, income can be streamed in a tax-efficient manner on a yearly basis. However, if income is not distributed, the trustees are liable for tax on the undistributed amount, typically at a rate higher than what the beneficiaries would pay. Additionally, in certain circumstances, trustees must pay tax on behalf of specific beneficiaries, most commonly children under 18 or individuals with certain disabilities.
The ATO has established a range of rules and guidelines governing family trusts to ensure compliance and prevent tax avoidance. The ATO expects accountants to ensure that family trusts are set up, administered, and reported in full compliance with tax laws. This means:
• Proper Documentation & Compliance: Accountants should ensure that the trust deed and all related documentation meet legal requirements and that the trust is operated according to its established rules.
• Accurate Record-Keeping & Reporting: They need to maintain detailed records of trust transactions, income distributions, and expenses, and ensure that all relevant information is correctly reported to the ATO.
• Advisory on Income Distribution: Accountants must guide trustees on how to distribute income in a manner that aligns with tax regulations, avoiding schemes that could be seen as tax avoidance.
• Monitoring and Avoiding Tax Avoidance: They should be vigilant about potential misuse of trusts for hiding income or facilitating improper tax benefits, and advise clients to steer clear of such practices.
Anchoram Business Services have developed internal systems to ensure we can support you to achieve your financial goals whilst ensuring transparency, proper administration, and compliance of family trusts with all tax obligations.
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