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Advice on using Trust to set up a trading company

Discussion in 'Accounting, Tax & Legal' started by Student, 25th Aug, 2009.

  1. Student

    Student New Member

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    I have a Discretionary Family Trust and I wish to start up a business which will buy products and sell them wholsale as well as Retail. I do not at this stage want to start a new company, but I am hoping that I can use the trust's ABN and TFN to trade.
    Q1 - Can I do this?
    Q2 - Instead of using the Family Trust name for the business, can I use a trading name?
    Q3 - If I can use a trading name instead, dose this name have to be registered?
    Q4 - Can I register the trading Name for GST or does the Trust register for GST?
     
    Last edited by a moderator: 25th Aug, 2009
  2. Rob G.

    Rob G. Well-Known Member

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    Probably not a good idea to conduct a business in the same trust.

    The assets/income stream of your DFT activities could be at risk from unrelated business creditors etc !!

    A trading trust is peculiar to Australia, partially due to lack of CGT discount (which is being reviewed apparently). However, if you are not intending to build up significant CGT assets (you only mentioned trading) then don't discount this structure for business activities.

    Basically, don't try to do it on the cheap ... get advice on the best structure *early* because changeover costs can be expensive.


    Cheers,

    Rob
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    As Rob mentioned, while you can technically do this, it is probably not a good idea.

    A Pty Ltd company doesn't cost that much to get up and running, why not set one up with the shares being owned by the trust so you can choose to pay company profit as dividends to the trust (and then on to beneficiaries of the trust) if you choose to do so?

    Just a thought.
     
  4. Rob G.

    Rob G. Well-Known Member

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    I am anxious to hear anything from the Henry tax review regarding CGT discount (disadvantages companies) and dividend imputation.

    If they scrap imputation I hope they reduce the corporate tax rate significantly.

    It seems a nonsense that companies are discriminated against for tax as business vehicles, after all this is what they were invented for.

    Cheers,

    Rob
     
  5. somebodyhere

    somebodyhere Member

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    Did you mean lack of CGT discount for company or trust? I thought trust can take advantage of CGT discount?
    Also, does it matter whether the trustee is a company or an individual?
    Thanks.
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think he was referring to the lack of CGT discount for companies.

    Trusts don't get the CGT discount as such, but the (personal) beneficiaries to whom the trust distributes do - which is effectively the same result anyway.

    Just to confuse things, I'm assuming that a trust distributing to a company as beneficiary would not receive CGT discount? I'd have to check that with my accountant, but I would be surprised if it did.

    Anyway, the trustee of the trust (personal or company) is irrelevant when it comes to how distributions are treated.