Decisions made now affect you later. If you plan early, you can benefit much greater when it comes to establishing a family trust. Tax implications can be lessened. For example, one of the common ways to benefit from a family trust is to establish it early enough to shift tax burdens onto family members in a lower tax bracket. This means the total family trust tax is reduced. While the other family member may incur more tax on paper, the burden from the Australian government is lessened when viewed from an entire “family perspective.”
A Family Trust also:
It is important to understand how family trust tax works. Yearly distributions are encouraged because taxes are incurred on income that sits in the trust. However, family trust tax is not paid on income that is distributed to the beneficiaries of the trust. Individual members of the trust might pay tax, but there are tax-free thresholds that allow distributions to be free from taxation under certain limits.
The document that establishes the members of the family trust is known as the “trust deed.” It is very important to name all the beneficiaries on the trust deed. Otherwise, any distributions made to those not named in the deed will incur the maximum family trust tax allowed.
The information presented here is to give you a broad overview of establishing family trusts. This is not presented as tax advice. To arrange this complicated legal structure, it is best to consult with one of our qualified accountants. They can best advise you on the best course of action for your family trust.
As part of strategic wealth management, it is advantageous to include provisions for the transfer of wealth during inheritance. While there is no inheritance tax in Australia, property may be subject to capital gains tax. With proper planning, the amount of value transferred to the recipient can be maximized while the taxes kept to a minimum.
Australia does not impose a gift tax. However, gifts given from a living person may be subject to capital gains tax.
Tim Nash & Associates can assist you in establishing a trust and dealing with family trust tax. If you would like to find out more about setting up a family trust and planning for the maximum benefits, give us a call today.