Family Trusts – They’re in the firing line.

Family Trusts have been used for many years as an effective tool to help reduce tax payable for individuals and business owners alike.

While in certain circumstances there are very clear benefits, the use of trusts also adds a layer of complexity to the most basic of scenarios.  This is one reason why family trusts are not suitable for every taxpayer. 

This complexity can range from legislative issues surrounding how income is distributed and how it is assessed.  Other complications can arise with asset protection, transfer of assets, taxation rules around capital gains tax, small business concessions and stamp duty concessions. 

It is essential that trust holders ensure their deeds are current and really the only way to do this is to regularly engage a solicitor to review their deed.  It is our opinion that a trust deed should be reviewed about every 3 years or when legislative or interpretative changes dictate.  However we feel that the cost to regularly review the deed is minimal when compared to the potential tax saving over a lifetime or two.  A review usually costs around $550.

In recent announcements and decisions coming from both the ATO and Treasury it is clear that both government bodies are targeting trusts in a big way.  For example, in the future it looks likely that:

• decisions regarding amounts being distributed from a trust will need to be made before the end of financial year, this is problematic to say the least. 
• Concessionally taxed distributions to children will be reduced considerably.
• Concessionally assessed land tax will be reviewed

These points alone make trusts a little less appealing.

Over the coming months we will continue to provide comment on trusts.  If you have any questions regarding your trust or if trusts are suitable for you, please contact your accountant.