Main features of a trust business structure
- a trust must have its own TFN for lodging its annual tax return and must show all income and deductions of the business, plus any distributions to its beneficiaries;
- a trust must have its own ABN;
- a trust must be registered for GST if annual turnover is $75,000 or more ($150,000 for non-profit organisations);
- a trust may be liable to pay tax depending on the wording of its deed and whether any income the trust earns is distributed to its beneficiaries;
- the trust may be able to access tax concessions;
- beneficiaries of the trust may be liable to make Pay As You Go (PAYG) instalments on distributions they receive from the trust; and
- the trust must pay super for any of its employees (this may include the trustee if they are also employed by the trust).
Advantages of using a trust
- asset protection;
- asset management;
- ability to split income; and
- capital gains discount flow-through.
Disadvantages of using a trust
- more expensive;
- complex regulations;
- profits can’t be retained without higher rate of tax; and
- losses cannot be distributed.
Examples of non-compliance
- claiming costs of improving asset as an expense;
- disposing of assets and not declaring revenue or capital gains;
- claiming input tax credits on purchase of asset or asset expenses;
- purchasing an asset through a business and not recognising fringe benefit liabilities that arise from the use of it;
- generating losses with the asset and pushing other income into the trust; and
- using business assets for person enjoyment of an associate or employee with FBT implications.