Family Trust
A discretionary family trust is a separate entity just like a company. It can trade in its own right but it does not pay tax the way a company does.
Instead, the profits of the trust must be distributed each year to the beneficiaries of the trust who pay tax on these distributions at their normal rates.
As well as providing some protection against claims from creditors, family trusts are also useful to reduce taxation by enabling income splitting.
For example, John Smith is a sole trader and earns $150,000 a year. The tax on this is $57,880. However, if his business could be run through a family trust the profits could be distributed as follows. The trust might pay a salary of $50,000 a year to John so he does not leave the 30 per cent tax bracket and his tax would be $11,380.
It could also make a tax-deductible superannuation contribution for him of $30,000. The contribution tax on this would be 15 per cent or $4500.
The trust could also distribute $50,000 to Mrs Smith and the remaining $20,000 could be distributed to the 19-year-old son who is at university and has no income. Tax on the son's distribution would be $2380.
The use of the family trust has enabled the family tax bill to be reduced from $57,880 to $29,640. This strategy has not just saved more than $28,000 in tax, it has also enabled the business owners to transfer $30,000 into superannuation where it cannot be touched if the business goes broke.
It is common to have a company as one of the beneficiaries of the family trust. This enables distributions to be passed down to the company and taxed at the company rate of 30 per cent.
Notice：
Family trusts are used to run businesses they are not available for ordinary pay-as-you-go employees. There can be a fine line between who is eligible to operate a company or trust and those who are not, so expert accounting advice should always be sought before a company or a trust is set up. |
发表于 20-8-2007 23:08:20
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