[Taxation Knowledge] Categories and Benefits of Establishing a Family Trust Fund

Today we come to popularize the two main forms of setting up a family trust fund, and the benefits family trusts can bring to a family.

First, let's introduce the relationship between people in family trusts.

1.Principal/appointor: The client has the right to remove or exchange the client

2. The trustee trustee: (may be both the client and the beneficiary), where the "principal" is actually the legal owner of the family trust asset.

3. The beneficiary beneficiary: According to the arrangement of the client, according to different proportions to enjoy the income generated in this family trust fund.

Family trust funds are mainly divided into two forms: individuals as trustees, or limited liability companies as trustees. Let us analyze the common points and differences between these two forms. Which method should we choose to establish a family trust fund?

Family trusts can, in many cases, play a role in protecting family assets. For example, a house bought by parents in a trust can allow the children to live in it, but ownership is not attributable to children. Once the child business or marriage problems, will not affect the property. Therefore, many high-risk homebuyers or groups that do business will establish family trusts to protect assets to prevent some changes.

In addition, in a situation where there are many family members and some are low-income people, establishing a family trust can rationally distribute the family's total income to each person's name and carry out tax optimization.

In most cases, the accountant or lawyer will advise the customer to use a company trust (Corporate Trustee). The main reasons are the following:

1) In the event of a change of family members in the future, the trustee trustee will always be the company and will not need to modify the trust deed. It is only necessary to change the company’s chairman and shares. The business in the family trust itself does not belong to anyone. If the principal only needs to change the Director to transfer the business to his chosen heir, this process does not result in the transfer of any assets. Therefore, there is no need to consider the capital gain tax. However, if it is in the form of an ordinary company, which is not a company in a family trust, the shares will be passed on to the next generation, and the value-added portion will be subject to VAT.

2) The branch insurance with the company as the trustee is smaller than the individual trust insurance. Because the company can apply for liquidation, if trustee Trustee is an individual and there is a problem with the business under trust in the future, the individual is responsible for all the responsibilities.

3) The annual income of the trust must be distributed to the beneficiary in accordance with the trustee's wishes, and there may be no retained earning. And the personal maximum tax rate can reach 45%. However, if the trustee trustee is in the form of a company, and the company is also a beneficiary. Then you can distribute the income generated in the trust to the name of the company. The company can have retained profits. And the company's tax rate is only 30% (small business is better 27.5%).

In general, the advantage of establishing a family trust is to protect family assets while also allowing taxation to be optimal. I hope that through today's brief introduction, everyone can have a new understanding of family trust. Since the Australian government will adjust tax regulations every year, there will be different preferential policies to attract investment. I hope that everyone has problems or can contact us in a timely manner, and continue to pay attention to our public number to obtain the latest tax information.

In order to thank the new and old customers for their support along the way, we have been appointed by China Accounting Firm. From now on, we will launch preferential activities for the following service projects:

1) Establish company

2) Set up family trust fund (individual/company as principal)

If necessary, please call or come to our office for advice. We will serve you wholeheartedly.

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