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Closing Trusts

Discussion in 'Accounting, Tax & Legal' started by Cymru, 28th Jul, 2010.

  1. Cymru

    Cymru New Member

    Joined:
    29th Dec, 2007
    Posts:
    1
    Location:
    Perth, WA
    Hi,

    I have two trusts, one a Family Trust and the other a Hybrid Trust(Asset Protection Trust).
    They were set up on the advice of an accountant with the purpose of purchasing property about 8 years ago. This cost me approximately $3,500 in accountant and solicitor fees.

    The trusts have never been used and have no assets in them.

    I am now approaching retirement age and cannot ever see the trusts being used.

    My accountant is charging me $100 per annum per trust to lodge a tax return for these trusts (he says this has to be done) i.e. a cost to me of $200 for something which is sitting there doing nothing.

    I told him that I did not want this ongoing cost and to "wind up" the trusts.

    He now tells me that :
    "The cost of lodging CU forms per trust is $99 and the cost to deregister and close the trustee companies with ASIC is $250 per trustee company."

    This is a cost to me of $700.

    On top of this he now says :

    That this only the cost of closing down the trustee company and on top of this there is the requirements for closing the trusts down.

    In relation to closing down the trusts, we will need to have the solicitors prepare the necessary deeds to vest the trusts.

    The solicitors have advised that providing the trusts have no assets other than the settled sum, the cost of Vesting the trusts will be $1090 (inc GST) each.

    So the upshot of this is that this excercise of closing down these 2 trusts is going to cost me $2,880 for something that I have never used. :mad:

    HELP - is there anybody out there who can advise a more cost effective method of doing this.

    I am in Perth and would be more than happy to move to another accountant who could make this a cheaper excercise.
    Or can anybody suggest a more palatable alternative.

    Regards,
    Cymru
     
  2. Superman

    Superman Well-Known Member

    Joined:
    6th Nov, 2007
    Posts:
    343
    Location:
    Gold Coast, QLD
    Hi Cymru,

    Technically your accountant is correct - to correctly vest the trusts from a legal and taxation compliance perspective you need to do all those things.

    The $99 amount per trust appears to be to notify the ATO that the trust will not be required to lodge future income tax returns.

    You could probably contact the ATO yourself and they should be able to instruct you what form(s) you need to lodge to advise this yourself.

    The $250 amount per trustee company to undertake the de-registration process seems about right - it should include (just check that it does) the $34 ASIC de-registration fee and your accountants time to prepare the necessary ASIC forms and company minutes to make it happen. You may also have to pay the most recent years ASIC annual fees ($218 each now).

    You could probably de-register the company yourself by downloading the form from ASIC here:
    http://www.asic.gov.au/asic/asic.nsf/asic+formsdisplayW?readform&code=6010

    So - dealing with the ATO and ASIC is relatively easy and you could do it yourself.


    The solicitors fees are another thing. You could read through your trust deed and maybe figure out what needs to happen in terms of declarations / procedures / minutes etc - however unless you have a brain for the legal jargon this might get a bit frustrating.

    Since you are in Perth maybe you should contact the people at LawCentral (Contact Us - LawCentral) - they produce a lot of do-it-yourself legal kits that allow you to do simple legal actions yourself without incurring high legal fees. I couldn't see one specifically for the vesting of a trust, however they would likely be able to do it for a reasonable price.


    Another thing I recommend is having a chat to your accountant and be upfront about the fact that you think it is ridiculous the amount he and the solicitor are going to charge you to wind up these trusts that have never been used.

    As an accountant I personally would prefer a client be upfront with me rather than go somewhere else or do a half-arsed / backyard job themselves and potentially get it wrong.

    By the sound of it your accountant and the solicitors they use would probably make a good job and ensure everything is done correctly - and hence why you pay a premium price.

    Also, don't be too hard on your accountant, I am sure when the structures were established they were set up for the correct reasons - i.e. to save you tax and protect your assets - but sometimes things change so structures and trusts need to be reviewed to ensure they are still suitable - which is where you are at now.

    I hope that the information and alternatives I have provided are a bit more palatable.

    Good luck
    SM:)
     
  3. NickM

    NickM Co-founder Staff Member

    Joined:
    20th Jun, 2005
    Posts:
    321
    Location:
    Sydney
    hi Cymru
    superman is giving you a good heads up

    Pricing is on the high side but you could prbably do most of it yourself & given that the trusts have never traded nor held assets your risk is negligible if you stuff it up.

    have another chat to your accountant & hopefully he will do the right thing

    Nickm
     
  4. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    You would probably just need to distribute the assets of the trust, which would probably just be the settled sum of $10 or $20 usually.

    The trustee would make a resolution to vest the assets of the trust (This would need to be done in accordance with the deed) and the money distributed. Once there are no assets then there is nothing left of trust.

    Don't forget to close bank accounts, deregister for ABN, GST etc. When you do the tax return, notify the ATO that this will be your final tax return.

    As for the company, you could deregister this yourself easily. Fill in the form on the ASIC website and pay the small fee.

    It may also be possible to sell the company as some want to buy companies with histories (misguided people usually). I sold a company that I never ended up using and had laying around. But this can be dangerous too if they go into liquidation shortly after you can look bad even though you may not have had anything to do with it.

    Also consider just keeping the trust running - maybe change the trustee to yourself. Just lodge your trust tax returns yourself. Nil returns are not hard to do. You never know when a trust may come in handy again - but your deeds would probably need updating.
     
  5. MitchLane

    MitchLane New Member

    Joined:
    12th Jun, 2015
    Posts:
    2
    Location:
    Sydney, NSW
    Hi,
    To save money...
    Is it possible to distribute the assets of Trust.
    Then the Trustee make a resolution to vest the assets of the Trust.
    Then close bank accounts.
    Then notify the ATO that this will be your last tax return.
    Then de-register the Trustee company.

    So not actually vesting the Trust at high expense.
    Can the Trust just sit there unused indefinitely without costing any more money to keep?

    Regards,
    Mitch
     
  6. Terryw

    Terryw Well-Known Member

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    Posts:
    653
    Location:
    Sydney
    That could be possible. Need to check the terms of the deed.

    But wouldn't save any money as the same steps need to be undertaken.
     
  7. MitchLane

    MitchLane New Member

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    12th Jun, 2015
    Posts:
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    Location:
    Sydney, NSW
    Wouldn't it save $1090, the cost of vesting the Trust?
    Regards,
    Mitch
     
  8. Terryw

    Terryw Well-Known Member

    Joined:
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    Posts:
    653
    Location:
    Sydney
    Trust would still vest. And the trustee would still need to do the legal documents.