Home – New Forums Money matters How do I stop using a discretionary trust/company trustee.

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  • #986171
    kalmen
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    Hello,

    I currently have a discretionary trust, and a company as a trustee.

    The past year wasn’t so great for business and this year is looking the same, so I was thinking of dissolving all remaining assets and doing my tax returns for this financial year (at June 30, 2014) and then not using this structure any more.

    The problem is, I don’t know what to do. If the trustee ITF the trust accounts are all empty, can I just leave it as it is and only renew the company registration every year?

    Not sure how to prooceed. Is a way to put the structure to sleep and pay minimum costs to keep it alive or do I have to completely delete it from existence and start a new structure when I intend to start again?

    Sorry, my understanding of these terms are limited, but I hope you understand what I mean.

    #1156622
    nighttax
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    kalmen, post: 180533 wrote:
    Hello,

    I currently have a discretionary trust, and a company as a trustee.
    this sounds like you are being charged heavily by your accountant for an almost empty trust with trustee company. And you are trying to go sole trader so you can save on accounting costs by doing your own return. The idea has merit but who ever answers you on this site does not know what sort of business you are in – by this I mean is it the sort of business that has risk of you being sued for mistakes or injury. And they have no idea if you have assets like a home in your name that you could lose if you traded in your own name and got sued. This is very important info to be considered.

    The past year wasn’t so great for business and this year is looking the same, so I was thinking of dissolving all remaining assets and doing my tax returns for this financial year (at June 30, 2014) and then not using this structure any more. perhaps you should contact the accountant that has been doing your work. The phrase “dissolving remaining assets is far to vague to give an accurate answer on”.

    The problem is, I don’t know what to do. If the trustee ITF the trust accounts are all empty, can I just leave it as it is and only renew the company registration every year? The trust exists until it is closed by the trustee. It can just lodge a return not necessary with the ATO if it does not trade in any year. Yes the company can sit there and you can just pay the annual fees and submit the annual form.

    Not sure how to prooceed. Is a way to put the structure to sleep and pay minimum costs to keep it alive or do I have to completely delete it from existence and start a new structure when I intend to start again?

    Sorry, my understanding of these terms are limited, but I hope you understand what I mean.

    regards
    Evan

    #1156623
    kalmen
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    Thank you for your feedback.

    I should have been more specific, you are right.

    At the moment, I am only using this setup for trading shares and stocks without using leverage, and now, I have sold all my shares and just have a bit of cash sitting around.

    When I mentioned ‘dissolving’, I mean transferring the cash back to my personal account which was an unsecured loan.

    If I could do my own tax return, I would be happy to continue as I have some background knowledge and my accounts are very simple, and the accountant fees make it not worth the hassle.

    I’m also wondering if there were no assets in my setup for the whole year if I was required to submit anything to the ATO.

    I hope this clarifies my situation better. Thanks in advance for your insights and feedback.

    #1156624
    Enviro Footprint
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    Just need to correct a comment – nighttax

    “by this I mean is it the sort of business that has risk of you being sued for mistakes or injury.”

    Regardless of the company structure you can be sued for injury, As an officer of the business who has substantial control, you can be liable for any prosecution, fines and imprisonment…

    Please don’t think you don’t have liability for injury just because its a company or trust..

    WHS Act 2011 (NSW – Harmonised)

    (a) in the case of an offence committed by an individual (other than as a person conducting a business or undertaking or as an officer of a person conducting a business or undertaking)—$300,000 or 5 years imprisonment or both, or

    (b) in the case of an offence committed by an individual as a person conducting a business or undertaking or as an officer of a person conducting a business or undertaking—$600,000 or 5 years imprisonment or both, or

    (c) in the case of an offence committed by a body corporate—$3,000,000.

    #1156625
    kalmen
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    Thank you for clarifying. I guess for me, I really wanted the TAX benefits, as I can distribute the income amongst my family.

    Enviro Footprint, post: 180553 wrote:
    Just need to correct a comment – nighttax

    “by this I mean is it the sort of business that has risk of you being sued for mistakes or injury.”

    Regardless of the company structure you can be sued for injury, As an officer of the business who has substantial control, you can be liable for any prosecution, fines and imprisonment…

    Please don’t think you don’t have liability for injury just because its a company or trust..

    WHS Act 2011 (NSW – Harmonised)

    (a) in the case of an offence committed by an individual (other than as a person conducting a business or undertaking or as an officer of a person conducting a business or undertaking)—$300,000 or 5 years imprisonment or both, or

    (b) in the case of an offence committed by an individual as a person conducting a business or undertaking or as an officer of a person conducting a business or undertaking—$600,000 or 5 years imprisonment or both, or

    (c) in the case of an offence committed by a body corporate—$3,000,000.

    #1156626
    nighttax
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    kalmen, post: 180551 wrote:
    Thank you for your feedback.

    I should have been more specific, you are right.

    At the moment, I am only using this setup for trading shares and stocks without using leverage, and now, I have sold all my shares and just have a bit of cash sitting around.

    When I mentioned ‘dissolving’, I mean transferring the cash back to my personal account which was an unsecured loan. If I understand this correctly – you put money in the trust so it could trade in shares. So there should be money owing to you from the trust so the transfer should be a simple return of a loan/capital and therefore tax free. Did the trust always make a profit or are there losses sitting in there? Losses cannot be removed from a trust.

    If I could do my own tax return, I would be happy to continue as I have some background knowledge and my accounts are very simple, and the accountant fees make it not worth the hassle.

    I’m also wondering if there were no assets in my setup for the whole year if I was required to submit anything to the ATO. If the trust does not trade and has no assets, but you want to keep it for future ventures, then all you have to do is ring the ATO and let them know that the trust did not trade for the respective financial year and s a return is not necessary.

    I hope this clarifies my situation better. Thanks in advance for your insights and feedback.

    As regards Enviro Footprints comments, he does not understand the situation we are discussing. Yes any person running a business can be sued especially in the case of personal injury. However in the company/trust structure, when there law suits over business errors or business failure occur then the assets of directors and beneficiaries are generally not touchable UNLESS you have in the courts eyes acted deliberately in an illegal or negligent manner. As such the business goes bust but you do not lose your personal assets. That is the original intent of the people who drafted Trust and company legislation. Only later did it become evident that they could be used for tax minimisation which the ATO is now trying to do away with.

    Regards
    Evan

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