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PTY LTD administrating a family trust?

Discussion in 'Starting a business' started by Rico, Nov 13, 2012.

  1. Rico

    Rico Active Member

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    Hello there,

    I need to create a new entity for a side of my business and my accountant is suggesting me to set up a LTD and a family trust. The only function of the LTD will be to manage the trust, and I will be operating using the trust, on a trust bank account. I will need to have both the trust name and the company name on my invoices and legal documents. The idea is that this double layer will allow me to legally withdraw money from the business when needed, without the need of establishing a salary for myself. He is also telling me that apart for a more expensive set up cost there will be no extra expenses.

    Sincerely I don't know much about those things, but it seems a complicate structure. Any opinion?
  2. JacquiPryor

    JacquiPryor Well-Known Member

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    Hi Rico,

    It may seem little more complicated than simply having & operating the Pty Ltd but my understanding is exactly as you have put it... with the Trust you will be able to simply withdraw monies as director's drawings rather than pay yourself a wage etc like you would operating straight from the Pty Ltd. Plus, once set up it will hum along just as easily. Plus, this sort of structure can offer further asset protection to my understanding. It's certainly not uncommon in my experience to have this sort of a set up.

    Once you know the set up you are after, if cost is a concern, then you could register through a corporate services company rather than have your accountant set it all up, as this will often save a bit of money. For example, one of the Flying Solo members - www.shelcom.com.au - (I believe their fee to set up the family trust is $475 and for Pty Ltd I believe $714, including the ASIC fee)...
  3. Dan (Turtle Technology)

    Dan (Turtle Technology) New Member

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    This is a common structure and has been recommended to me by several accountants. You can make distributions to the members of the trust. It costs more to set it up and a little more to maintain it but this could be offset by the advantages.
  4. Rico

    Rico Active Member

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    Thanks Jaqui, you are always extremely helpful. I am going to check your contact as the price is definitely more competitive!
    2 people like this.
  5. Website & SEO

    Website & SEO New Member

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    Hi Rico, try trustdeed , You will get LTD and trust Both at one place..

    hope it will work..
  6. TehCamel

    TehCamel Active Member

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    this is what my accountant has recommended and setup for us.
    The trust does all the trading, the Pty Ltd does exactly nothing, except act as Trustee.

    The trustee then decides which beneficiaries to stream the income to, in the most tax effective way.
    (Also, the trust pays no tax, however must pay out all it's income)

    if i wanted to, I could stream income to the Pty Ltd. which could then just hold the cash.
  7. Rico

    Rico Active Member

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    Yeah, thanks everyone for your suggestions, I end up following your advise.

    I started this new company on the 14th of November in Cairns, the day of the total solar eclipse! It's not that I believe in those things, but I'm originally from Italy, and we say that not being superstitious brings you bad luck :D
    1 person likes this.
  8. MH08

    MH08 Active Member

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    Trusts....

    I have 2, and I have them professionaly setup through my own legal team working with my accountants on the bottom floor. Some words of advice.

    Proper trusts are built through solicitors then accountants will hold the binder and do all the record keeping. Bear in mind a correct trust structure is everything, there are templates out there but they are not tailored to your lifestyle and business.

    If the trust is a template trust, and that the solicitor has not sent information about the trust to the Corporation Act body, ASIC with all the measures in place such as, deaths, directors, minutes and so on, then it could be a waste of money, specially as something like a trust that can be used for everything in your life.

    My binders have around 400 pages each. These companies were from start-ups. I'm more than happy to give any one a helping hand or referrals but they are not cheap to setup.

    Also the added protection are a few things, for instance my family trust as a my company is the trustee of this, which is also the share holder of a unit trust in which a company again is a trustee of the unit trust (very complex stuff). This essentially means that if I earn say;

    $100,000 - 30% company tax $30,000 = $75,000 / 2 = $35k Each.

    The company will pay 30% company tax, and I pay my wife $35k and myself $35k I won't pay tax, because it will become an imputation credit once distributed at my discretion. This means that if I payed myself and wife $100k each, I still will only pay 15% tax, because 45% will have a tax imputation credit of 30% because I can't pay tax twice.

    Though my case is different, every case is different, the added protection also is that you essentially own nothing (but control it at your own discretion), at the best of times its very hard for banks to understand and you may be left with visiting business banks in the city.

    My background is stockbroking and financial services, though my advice is general on accountancy levels.

    Also with having companies own everything and also being trustee's, bear in mind that not many companies like dealing with trustee companies, Paypal is a good example.

    There are also multiple costs, the company will have its own ACN and ABN, the trust itself will also have a ABN, ACN and Tax file number, professional fees, handling fees, faxing etc.

    And remember when going to the bank, bring the bank kit (solicitors create these, sometimes accountants can be bothered with the LEGAL part for the bank to understand whats happening) and trust deeds and forms of ID. Without a trust deed and ACN registration, tax file number (won't need it to open the account but it will be the highest MTR otherwise), details of the trusts structure, the bank manager/financial advisor won't be able to open the account.

    Also not all banks have trained staff to create the account, it has to be a trust account. Not a company a account, so no business savers accounts or GST provisions and so on, just the account, and its upto you if you wan't to register for GST and you don't have to until you reach over $75,000 or your trading (you can operate as a business for a short period of time without becoming a trading company.

    So it will be The [company name] Pty Ltd is the trustee ATV in trust of the [whatever name] Family/Discretionary trust, along those lines I would have to double check with the binders. Also the bank can allow you to have only the company name on the cheque books, just say you don't want people to know it's a trust due to privacy concerns and they'll do it how you like.

    Everything is at a cost, a very strong structure can leave you short of around $2500 to $10,000, depending how indepth the strcuture is.

    And remember, when entering the bank to setup the account tell them its a trust, this can only be done by a bank manager, business bank management team or in house financial advisors.

    Hope it helps.

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