Discretionary Trusts
As a business owner, you must decide what structure you want your business or other assets to operate from.
This can include:
- Company
- Trust
- Sole Trader
- Partnership
What is a Discretionary Trust and why would you consider one?
A discretionary trust is a type of trust in which the trustee has the power to decide who receives the benefits from the trust, how much they will receive, and when they receive them.
Generally, the beneficiaries of the trust include the parents, siblings, spouses, children and grandchildren of the primary beneficiary.
This gives the trustee a great deal of flexibility in terms of how they distribute the trust’s assets, which in turn can impact tax obligations.
The trustee of a discretionary trust can be you personally, or it can be a company. Having a company as the trustee is often used to protect assets held within the trust from being seized by creditors.
How are Discretionary Trusts taxed?
In Australia, trusts are taxed at the highest tax bracket, which is why it is important to distribute all earning from the trust to its beneficiaries. The beneficiaries will be taxed at their income tax bracket.
Each structure has it’s own advantages and disadvantages, so it’s important to consult with a specialist to determine which structure will best suit your circumstances. Give us a call to discuss your options.