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Company and Discretionary Trust

Discussion in 'Investing Strategies' started by Passion, 4th Aug, 2012.

  1. Passion

    Passion New Member

    Joined:
    4th Aug, 2012
    Posts:
    2
    Location:
    Melbourne
    Hi I am new so sorry if this question has been asked before.

    My hubby and I run a company (say 123) which thankfully has accumulated a decent cashflow(he is the only shareholder). We have decided to set up a Discretionary Trust and would like to contribute some private funds and well as some company funds from the Company 123 into the trust(treated as an Investment not a loan). Is there any Div 7 issues we should be aware of?

    The beneficiaries of this trust will be Company 123, hubby & me and our kids. Once we reach our Income thresholds ($37k), excess income will go back to the Company 123 for assessment.

    We don't owe any money in either structure(the Company 123 owes my husband some money when we transfered from a private sole trader to Company 123) and we intend to buy the property in the Trust with the available cash-no loans.

    We have seen our lawyer and he sees no problem but the Accountant who audits our accounts(I prepare the Financials and lodge our returns) seems kind of hazy when I ask him these questions.

    We are happy to consult with someone on these issue.

    Thanks
     
  2. Terryw

    Terryw Well-Known Member

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    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    you have to work out how younshould get the money from the company to the trust. loan or divdends or wages to a person and then gift or loan to trust. there would be div 7a issues but these may be overcome by loan agreements. you need to plan many years ahead about this.

    there are also other issues such as asset protection to consider.
     
  3. Passion

    Passion New Member

    Joined:
    4th Aug, 2012
    Posts:
    2
    Location:
    Melbourne
    Thank you.

    We are thinking along the lines of setting up loan agreements between the company and the Trust. Purely investment vehicle. No loans. Also allocating private funds to the trust.

    Can anyone recomend an expert in these matters(in Melbourne)?

    Thanks
     
  4. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    The question is how to get the funds into the trust. You say as an investment, but an investment in what?
    If it was a unit trust, the company and you as individuals could purchase units to get the funds in. The other options seem to be a loan or a gift.

    From what you have said, it seems the intention is to distribute income from a rental property to beneficiaries to keep below the income threshold and then any additional income to go back to the company. You may be able to achieve this with a unit trust structure or even a hybrid trust but take care and plan for long term possibilities.

    It would seem a loan from the company could work for a discretionary trust while you could still contribute personal funds as well.
    GregR