How to set-up a family trust

  • Chartered Accountants
  • Tax Agent 25955893
family trust

Setting up a family trust is a great way to optimise your tax position and share assets and distributions with family members. In saying that, it is important that you get the right advice before setting up your family trust.

This is a complete guide to starting a family trust in Australia. If you have any questions along the way you can contact us at any time.

A family Trust is an entity that has the following people;

  • Trustee(s) – controls the day-to-day
    decisions and signs important documentation including tax returns
  • Appointor – Appoints the Trustee and has
    the power to change the Trustee
  • Beneficiaries – entities/individuals
    entitled to the trust’s income and assets
  • Settlor – third party who settles the
    Trust (nominal fee of $10 normally)

The Trustee can be individual(s) or a company.

Corporate Trustee vs Individual Trustee

If the Trust will be trading as a business, it is advisable
to have a company trustee also known as a corporate trustee. By doing this, the trustee company could be sued in the event of a dispute. As the company is a separate legal entity, the individuals would be safe from litigation, and personal assets are protected.

If the Trust will have passive investments with low risk,
individual trustee(s) are fine.

Steps to establish a Family Trust

To establish a Trust, the following steps occur;

  1. Choose Trustee – Corporate or individual(s)
  2. Choose Trust name
  3. Draft the Trust Deed – POP can assist with this including the Trust Deed document for a nominal cost of $700 plus gst
  4. Settle the trust – This is done when the settlor signs the trust deed and gives the initial settlement sum
  5. Date and sign the Trust Deed (Execute the Deed)
  6. Apply for ABN and TFN of the Trust
  7. Set-up trust bank account
  8. Pay Stamp Duty to relevant state body if
    applicable

What are the benefits of a family trust

How to set up a family trust

  • Income earned the family trust is distributed to family members each year to be taxed at marginal tax rates.
  • Trust assets cannot be challenged in the same manner that a will can be challenged.
  • Assets can stay in the family and be passed through the family.
  • Family assets are protected, as the liabilities of any member of the family do not have to be paid from the trust assets.

How long does it take to establish a family trust?

A family trust takes on average 10 days to be fully established. Documentation is required to be signed by the relevant members. 

If a corporate trustee is required, this will need to be established first which may take an additional day. If stamp duty is required, this normally takes 5 business days to be processed.

What is the cost to establish a Family Trust?

POP Business charges a nominal fee of $700 plus gst to establish a family trust. 

This includes the Trust Deed, acting as settlor, facilitating the stamp duty if applicable and attending to the registrations of ABN and TFN.

The following stamp duty will be payable depending on which state the Trust will operate out of;

                           $                                       Payable

NSW                500                90 days from execution

VIC                  200                 30 days from execution

TAS                   50                  90 days from execution

NT                     20                  60 days from execution

QLD                          

WA                     –

SA                       –

ACT                    –

Annual obligations of a family trust

If the Trust earned income, it is required to lodge a Trust tax return with the Australian Taxation Office. Further, the Trust can also be required to maintain accounting records including a profit and loss statement and balance sheet. Any original source documentation is required to be maintained for a period of 5 years.

The Trustee(s) is also required to sign a Trustee Resolution before 30 June each year which stipulates the income apportionment to the beneficiaries.

Key take-outs

In conclusion, there are a few things to think about when establishing a family trust. They are great investment vehicle and provide tax minimisation across a family group. 

If you have any questions on establishing a family trust you can get in touch.

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