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Taxopia Trust Establishment
Cost of a Trust
If you’re looking to establish your own trust, you’ve come to the right place. At Taxopia, we have an online form to help you easily and quickly establish a discretionary (family) trust under Australian law.
The setup cost for a standard discretionary, unit or family trust with electronic documents is $475 + GST + 2% credit card surcharge (if applicable) and will include:
- Trust deed documents
- Required minutes for trustee appointment
- Unitholders certificates where applicable
- $200 State revenue office stamping fee included
- Application for Trust Tax File Number (if applicable)
- Application for Trust Australian Business Number (ABN) if required
- Application for GST and PAYG withholding on wages if required
The form takes approximately 10 to 15 minutes to complete and you can save your progress to resume later.
To start, click on the “Start Now” button below.
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What is a Trust?
A Trust is an obligation imposed on an individual or company to hold property or assets for the benefit of others. The holder of the trust is called the Trustee and the others are Beneficiaries. Trusts are not at a separate entity therefore liability lies with the Trustee. The Trustee is responsible for all business operations and there are yearly administrative tasks to complete. All transactions are undertaken by the Trustee and all are therefore a personal obligation.
A Trust is a more expensive business structure to set up, but there are benefits to working within this model. The Trustee can be employed by the Trust, and there can be employees. Income Tax doesn’t need to be paid for this structure as an entity but is passed on to beneficiaries however, GST may be applicable. Tax-free capital gains and tax incentives can be claimed by the beneficiaries should the structure be set up to allow this. A Trust requires an official Trust Deed to be completed by a qualified accountant or business lawyer.
Types of Trusts
There are many types of trusts that individuals and businesses can apply for, but there is no one-size-fits-all type of solution. Choosing the right one depends on numerous factors pertaining to the applicant’s conditions and their overall end goal. Below are three common types of trusts that are usually dealt with.
Discretionary (Family) Trust
Discretionary or Family trusts are established when there are family assets which include shares, personal property, or a business that have to be managed by, protected by, and passed on to the next generation. Distribution of income and capital gains to any family member that is deemed fit, is at the discretion of the trustee. The coverage of Family Trusts may include a client’s own family lineage, children, grand parents, siblings, nephews, nieces, and spouse.
Minor’s Trust
When a family member has legally set aside funds or assets for a child under the age of 18 to for future educational, medical, or recreational expenses, a Minor’s Trust ensure the protection and management of those receivables until the child, in this case a beneficiary, becomes an adult. There can be multiple beneficiaries under the one trust and trustees under this category may be a parent, sibling or friend of the minor as long as they are 18 years of age and residents of Australia.
Testamentary Trusts Through Wills
A person may write a will with instructions that can pave way to the establishment of a Testamentary Trust once the said person has passed away. When this happens, the deceased person’s assets are held in trust on behalf of the beneficiaries rather than distributing the assets directly to them. The rules in the Testamentary Trust, as written by the deceased, will dictate the way the assets are distributed to the beneficiaries. This trust also can protect the assets a beneficiary may receive in the event of bankruptcy or business lawsuit among many other instances.
Benefits of Establishing a Trust
There are many varied benefits and plenty of uses for trusts, so thinking about your specific goals and your beneficiaries is key to choosing the right type. For example, having assets in a trust ensures the professional ongoing management of those assets. From a cost standpoint, trusts can be a good way of reducing tax liabilities and probate fees. Trusts are also established to keep assets out of a surviving spouse’s estate while also providing lifetime income. Individuals with special needs may also benefit from trusts especially if the provisions within them are designed to use the assets in funding their needs. Furthermore, by putting assets inside the legal boundaries of a trust, individuals are protected from poor investment decisions or being taken advantage of by others.
Your Trust Establishment Questions Answered
Can I Transfer Property I Already Own Into a New Trust?
If you set up a new trust, you can transfer property that you already own into it. You should know that the transfer of property into a trust will generally be classed as a sale. This can be an expensive exercise as, in addition to the appropriate sales contracts/agreements, this can incur Capital Gains Tax and stamp duty. Ensure that you speak with an accountant if you’re looking to establish a trust and transfer existing property.
Can People Under 18 Be a Beneficiary?
Yes, but you should be aware that if a trustee distributes income to someone under 18, they will be subject to a substantial amount of tax.
Can a Trustee Also Be a Beneficiary of a Trust?
Yes, a trustee can be one of the beneficiaries of a trust. For example, an individual could set up a trust, appoint themselves as trustee and distribute income to their family. However, a trustee cannot be the sole beneficiary of a trust. This is because they would legally own property for the benefit of themselves, which is problematic from a legal perspective.
Can Beneficiaries Claim Distributions?
Beneficiaries do not have a claim to any trust distributions. Rather, there is a ‘mere expectancy’ that the trustee may distribute income if they choose. Hence, the term ‘discretionary’ trust.
A beneficiary can request that the trustee act in a particular way through a document known as a memorandum of wishes. This document can outline an arrangement that the beneficiaries may like to have in place. However, as the name suggests, it is merely a ‘wish,’ than an order that the trustee acts a certain way. This is another important reason why you should only appoint a trustee that you trust.
Who Owns the Trust Property?
Unlike a person or a company, a trust is not a legal entity that can own property. This is because a ‘trust’ is just a relationship between the legal owner (the trustee) and the beneficial owners (the beneficiaries). As such, documents including a house title, share certificate, or members’ register will list the trustee as the property owner.
Do All Beneficiaries Have to Be From the Same Family?
Another frequently asked question about trust concerns whether the beneficiaries of a trust all have to be from the same family. A family trust and discretionary trust are essentially the same. The trustee maintains the discretion to distribute income as they see fit. It is more likely, however, that the beneficiaries are all members of the same family. A family trust is simply a commonly used term, rather than a requirement that the beneficiaries all be from the same family. Therefore, there is no restriction on you listing people outside your family as a beneficiary.
However, if you do list people outside your family, you may not be able to make a family trust election for tax purposes. This means you will lose access to certain concessions and benefits you would otherwise get if you make the family trust election. Further, if you make distributions to people outside your family, the trustee might need to pay tax on these distributions at the highest marginal tax rate. This is if you have made a family trust election to the Australian Taxation Office for that trust.
What Are the Benefits of the Trustee Exercising Discretion to Distribute Income?
Beneficiaries have no claim to any portion of the trust income. They only receive a benefit when the trustee exercises their discretion and distributes the income. The effect is that a person’s status as a beneficiary does not result in a tangible gain or proprietary interest in the trust property. As there is no claim to the property, you are not subject to tax implications if you do not receive a distribution.
Disadvantages can include that the trustee can stop distributions to a particular beneficiary at any time. Likewise, a beneficiary can do little to change this arrangement. This can present a problem should a dispute arise with the trustee, for example, a family fall out. This is a key reason why you should exercise great care when selecting a trustee.
Is the Trustee Subject to Any Rules or Regulations?
In short: Yes! The trust deed sets out the scope of a trustee’s powers. So, if you have specific requirements, consider drafting a deed to limit, constrain or manage their powers. Trustees are also subject to a variety of other requirements from both common law and statute.
Notably, a trustee has a fiduciary relationship with the beneficiaries. This relationship exists because of the trust placed in the trustee. To protect those in a vulnerable position (those putting trust in the trustee), the law recognises this special relationship and places duties on the trustee to ensure they act in good faith and the trust’s best interests.