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Discussion in 'Introductions' started by Spike, 21st Apr, 2010.

  1. Spike

    Spike New Member

    Joined:
    21st Apr, 2010
    Posts:
    2
    Location:
    Malbourne, VIC
    Hi, I am Spike and a real Newbie and also a late starter(appoaching 60).

    I will probably have lots of questions that have been asked a 1000 times before, but humour me and keep it simple (KISS).

    I work and earn >$150,000

    My wife looks after all of the administrative affairs of the business (and the family) and also works outside the home earning a modest $23,000.
    I have 5 children of whom:
    a. One, an adult, is employed part-time, but is topped up by a disability pension (C'wealth).
    b. Two are married with children (our grand children - 3).
    c. One is 19 and at University doing IT, so he looks after all my IT admin issues (network, printers, routers, firewalls, etc.). He also works part time at Coles Group.
    d. The youngest (17) is completing year 12 this year and does graphics, but does not work - too much sport.

    My objective is to maximise net income and superannuation while minimising tax (legally, of course).

    On advice, I have started a family trust, as I have been an IPRO for a couple of years. I don't fully understand the money flow. I think it is as follows:

    1. My trust receives money from my contracting entity (in this case Entity Solutions).
    - Question: Is this money capital or income for the trust?
    - Question if it is capital and income (interest earned on the funds during the year), can I allocate capital and interest separately?

    2. The trust then divides the money as it sees fit to the beneficiaries which are all of the above.
    a. I wish to contribute the maximum into super for the year ($50,000 for me) and will take income sufficient to run the household.
    b. As my wife does the administration, I believe that the Trust can pay her for this - something less that $30,000 per year and maybe all or mostly Super.
    c. Can I pay my 19 year old son for IT support - e.g. $20,000 per year?
    d. Can I pay my 17 year old Student son for graphics and miscellaneous activities - say $7,500?
    e. Can I distribute funds to my grand children (minors) at the rate of $1,667 which I read is the current allowable without a tax return?

    Does any of these distributions have to be physically given to them or can it be kept in (given back to) the trust as capital for later use - e.g. education costs. Does this have to be reported by anyone other than the trust if it is a zero taxed amount?

    Any and all information and suggestions are most welcome.

    Spike
     
    Last edited by a moderator: 21st Apr, 2010
  2. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Hi Spike and welcome to the forum.

    I'm not up to date with trusts so I can't answer your questions reliably but hopefully someone else will see your thread and reply.

    If you don't get answers, try starting another thread in the general investment section
    General Investing Discussion

    cheers
     
  3. Vagon

    Vagon Well-Known Member

    Joined:
    31st Mar, 2010
    Posts:
    56
    Location:
    Sydney
    Hi Spike,

    You're questions will depend on exactly how it's structured. It's a very good idea to go to an accountant or the legal professional who set your trust up and ask them these questions. The cost of advice will be worth the benefit. Anyhow here's my guess based on what you've given us and assumptions:

    1. If the trust owns shares in (or all of) Equity Solutions then its likely any distributions will be income into the trust. Whether you distribute it or retain it as capital is up to the appointer.

    2. a) This $50,000 is coming from the trust or your salary? The tax bracket you're in is 80-180K a year so $50,000 in and of itself will not drop you a bracket but it will be taxed differently if going straight to super. Salary sacrificing could also be used for some fringe benefits so ask your employer because it can be deductible for them too. If you're self employed this could work even better.

    b-d) All this is fine, but each person would need an ABN and to have business activity statements with legitimate invoicing to be employed by the trust. There's probably going to be implications for a trust employing people, you should check with your lawyer.

    e) They would be beneficiaries depending on how you've structured it, but almost definitely not employed.

    RE: storing distributions.
    If you are keeping funds in the trust then you cant divvy them out tax free at a later date. So for example say you do not pay $1667 to your grand kids in 2010 you cant backdate and pay them $3334 tax free in 2011.

    All this is slightly irrelevant depending on what Equity Solutions does and whether you employ your family as part of the company or the trust employs them or distributes to them as part of the trust. Or any other number of structures. To reiterate, from the looks of your varied questions your best bet is to talk to a professional that knows your exact circumstances. GregR on these boards could be of assistance - he is also in Melb.
     
  4. Spike

    Spike New Member

    Joined:
    21st Apr, 2010
    Posts:
    2
    Location:
    Malbourne, VIC
    Family Trust info

    Thanks for all that. Some relevant and some not, but it is all good info and as the sying goes ... 'you can't learn less...'.
    I have learnt a lot.
    BTW, I have sent this to both my accountant and financial advisor - one has replied.
    Thanks again,

    :) Spike