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.