Business Accountants Ballarat Accountants Ballarat Bookkeepers Sunbury Accountants Gisborne Accountants Melbourne Sydney Brisbane Mortgage Broker Financial Planning Discretionary trust Accountants for Manufacturing Companies Family Trust Company Trust Accountant for Farm Business Accountant for Doctors Accountant for Construction Companies Sydney Accountants Brisbane Accountants Sydney Bookkeepers Brisbane Bookkeepers Ballarat Financial Planners Sunbury Financial Planners Gisborne Financial Planners Melbourne Bookkeepers Melbourne Financial Planners Ballarat Mortgage Brokers Sunbury Mortgage Brokers Gisborne Mortgage Brokers Melbourne Mortgage Brokers Sydney Mortgage Brokers Business Structure Business Consultants

Ballarat Accountants: The Pros and Cons of Discretionary Trusts

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at info@skyacc.com.au or 1300 328 855

Discretionary Trust

Advantages and disadvantages of discretionary trusts:

1.       Beneficiaries can accumulate assets in discretionary trusts

2.       Discretionary trusts offer flexibility over income and capital distribution

3.       Discretionary trusts allow for simpler reporting

4.       Discretionary trusts offer discounts on capital gains taxes

5.       Beneficiaries lack proprietary or equitable legal interest in property

6.       Discretionary trusts come with family trust distribution tax fees

7.       Discretionary trusts are subject to certain regulations

Trustees hold the property for the beneficiaries in a discretionary trust. An appointor can hire and fire a trustee and has control over the wealth in the trust.

Many businesses in Australia are operating in discretionary trusts particularly family businesses. The beneficiaries of discretionary trusts are often immediate or extended family members, family companies or charities. They do not all have to be included when the trust is established and can be added later on. In a discretionary trust, beneficiaries do not have interest in the trust property unless the trustee decides to distribute to them.

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at info@skyacc.com.au or 1300 328 855

Trustees can exercise their discretion to distribute capital or income among the beneficiaries. They are not held to agreements or arrangements, which makes discretionary trusts flexible but may be too nebulous for other stakeholders. Each business is different that’s why it is important to weigh the advantages and disadvantages of a discretionary trust structure for each unique situation.

Discretionary Trusts

 Discretionary trusts are attractive as they suit most businesses and organisations better than other business structures. Unlike other business structures, discretionary trusts allow beneficiaries to accumulate assets, which along with capital can be distributed to them without significant tax consequences.

Discretionary trusts are also flexible with how income and capital are distributed. The trustees can decide to allocate funds to certain beneficiaries without the need to make big changes. They restrict and specify the trust beneficiaries which simplifies reporting like claiming of tax losses, franking credits and debt deductions. Beneficiaries of discretionary trusts often can’t benefit from franking credits attached to share dividends received by the trust and passed on to the beneficiaries.

Discretionary trusts are also entitled to CGT discounts made on the disposal of asset in the trust that’s owned for more than 12 months. Shareholders are eligible for the CGT discount but the discount doesn’t apply to companies that hold shares.

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at info@skyacc.com.au or 1300 328 855

Some of the disadvantages of discretionary trusts weigh heavier for some businesses because of factors such as income, losses, assets and size. Beneficiaries lack proprietary or equitable legal interest in property because the trustees can decide to change allocations. Beneficiaries cannot count on their share of the assets because allocation can change instantly.

Even the trustees’ decisions can be overturned per a recent court case. The Court found that assets in discretionary trusts are liable to property settlements so it can effectively dismantle complex discretionary trusts. In Kennon vs. Spry, discretionary trust assets were part of a property pool in family law proceedings. The Court reversed some complex amendments to the trust and removed the husband and wife as beneficiaries.

Discretionary Trusts

Family trust distribution tax applies when the distribution is outside the family group. The family group is designated through an election so trustees need to choose the appropriate test individual for the family group. Note that a reasonable benefit like superannuation, salary or wage is not a distribution.

Discretionary trusts also come with additional compliance obligations that can distract business owners. If you’re a business owner who wants to grow your organisation, it can be frustrating to meet these compliance responsibilities. Discretionary trusts are less appropriate and less common for businesses with two or more independent people who are not family because they often want to know exactly who will receive what so they can make wise business and investment decisions.

At Sky Accountants Ballarat & Bookkeepers Ballarat, our goal is to empower you to become a better, more finance-focused and well-rounded entrepreneur. Contact us at info@skyacc.com.au or 1300 328 855

If you want something flexible, a discretionary trust may be for you. It also provides asset protection and can prevent creditors from accessing key assets. If a business fails and goes bankrupt, creditors can’t touch any property in a discretionary trust. The trustees have complete control over capital and income distribution so if the net income distribution happens each end of financial year, taxes could be minimised.

Established and administrative costs of discretionary trusts may be more expensive than other business structures, depending on its complexity. Seek professional advice to know if a discretionary trust is best for your business. Discretionary trusts are a common business structure in Australia because of the taxation advantages. It suits family businesses because of its flexibility and protection. However, sometimes, taxation can be more burdensome in a discretionary trust than another business structure and obligatory compliance may be something you are not willing to take on.

What is the right business structure for your business?

Business Accountants Ballarat

As you look for different ways to grow and improve your business, seeking professional advice could prove to be an important and helpful decision.

You can click here to speak to a businessaccounting and bookkeeping firm. We also offer hospitality business consultation and mortgage services. We will give you a call to know more about your needs. We will explain to you how we can improve your business.

We would love to help you formulate investment strategies and streamline your processes to take your business to the next level.  Our goal is to help you grow your business, find ways to invest more and increase your productivity.

PS. Here are two other ways we help business owners grow their business:

1. Take our free online assessment and see how much your business is currently worth (free 30page detailed report included)

2. If you are looking to change Accountants or need advice on how to grow your business, organise a 1on1 session with a Sky Business Expert here

 

Email Address: info@skyacc.com.au

Ballarat Accountants | Business Accountants Ballarat | Ballarat Bookkeepers | Ballarat Mortgage Broker | Ballarat Financial Planners | Ballarat Accounting Firms | Ballarat Bookkeeping Firms | Restaurant Accountants in Ballarat | Accountants for Manufacturing Business in Ballarat | Farm Accountants in Ballarat | Accountants for Medical Professionals in Ballarat | Accountants for Tradies in Ballarat | Company Accountants in Ballarat | Company Bookkeepers in Ballarat | Casino Accountants in Ballarat | Spa Accountants in Ballarat | Cafe Accountants in Ballarat

Phone: 1300 328 855
Office Address: 
902 Howitt Street, Wendouree, Victoria 3355, Australia
Postal Address: PO Box 2234, Bakery Hill, Victoria 3354

Melbourne Accountants | Business Accountants Melbourne | Melbourne Bookkeepers | Melbourne Mortgage Brokers | Melbourne Financial Planners | Melbourne Accounting Firms | Melbourne Bookkeeping Firms | Restaurant Accountants in Melbourne | Accountants for Manufacturing Business in Melbourne | Farm Accountants in Melbourne | Accountants for Medical Professionals in Melbourne | Accountants for Tradies in Melbourne | Company Accountants in Melbourne | Company Bookkeepers in Melbourne | Casino Accountants in Melbourne | Spa Accountants in Melbourne | Cafe Accountants in Melbourne

Sunbury Accountants | Business Accountants Sunbury | Sunbury Bookkeepers | Sunbury Mortgage Brokers | Sunbury Financial Planners | Sunbury Accounting Firms | Sunbury Bookkeeping Firms | Restaurant Accountants in Sunbury | Accountants for Manufacturing Business in Sunbury | Farm Accountants in Sunbury | Accountants for Medical Professionals in Sunbury | Accountants for Tradies in Sunbury | Company Accountants in Sunbury | Company Bookkeepers in Sunbury | Casino Accountants in Sunbury | Spa Accountants in Sunbury | Cafe Accountants in Sunbury

Gisborne Accountants | Business Accountants Gisborne | Gisborne Bookkeepers | Gisborne Mortgage Brokers | Gisborne Financial Planners | Gisborne Accounting Firms | Gisborne Bookkeeping Firms | Restaurant Accountants in Gisborne | Accountants for Manufacturing Business in Gisborne | Farm Accountants in Gisborne | Accountants for Medical Professionals in Gisborne | Accountants for Tradies in Gisborne | Company Accountants in Gisborne | Company Bookkeepers in Gisborne | Casino Accountants in Gisborne | Spa Accountants in Gisborne | Cafe Accountants in Gisborne

Phone: 03 97444522
Sunbury Office Address: 
Suite 13, 33-35 Macedon Street, Sunbury, Victoria 3429, Australia
Gisborne Office Address: 
45 Hamilton Street, Gisborne, Victoria 3437, Australia

Postal Address: PO Box 270 Gisborne Victoria 3437

 

Disclaimer

Wordpress Social Share Plugin powered by Ultimatelysocial