Join our investing community

Setting up a new Investment Trust- Structures

Discussion in 'Investing Strategies' started by macie, 21st Oct, 2011.

  1. macie

    macie New Member

    Joined:
    21st Oct, 2011
    Posts:
    4
    Location:
    bendigo, vic
    I'm in the process of setting up a Corporate Trustee and a trust.

    The structure would be:

    'CORP TRUSTEE ABC' ATF 'MYTRUST 123'.

    The corporate trustee would own some startup companies, properties and one existing company and will offset any income from one company with any losses from another before distributing income to the family members and finally 'BUCKET COMPANY XYZ'- which will act as a bank to loan money back to the trust.

    My questions would be:

    1. Is there any problems you see with the structure above? Can I deduct one company losses from another ones earnings if they are both owned by the trust?

    2. How would I go about introducing a charity to this structure? I would eventually like to make large contributions to a charity/charitable fund with the trust income and need to know if I need to set up a charitable fund/trust from the start to avoid the complications of adding a beneficiary at a later date?

    3. Does the Bucket company need to charge interest to the trust when loaning the money back to it and can it loan to any part of the trust (eg. to the trading companies owned by the trust)

    4. Are there any naming conventions I need to use for the trust? Does it need to say 'family trust' or anything?

    Thanks for any help offered.
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    I think you should get some advice before setting it up.

    If the trustee is owing shares in other companies then the losses of one company wouldn't be able to be offset against income of another company. You could do this with a separate trust for each one, but there are some complex rules to overcome.

    Charities are complex. There are many issues here too. You could form a charity as a trust or a company or an association. You probably want to look at getting any income from the trust to be tax exempt and you would want any donations to the charity to be tax deductible. These are two or three separate issues. If your trust deed is worded right your trust should be able to distribute income to a charity as a beneficiary. But it could work out better for the trust to distribute money to a lower income beneficiary who could then gift it to their higher tax paying relative who could then donate it to the charity and claim a larger deduction.

    I am not sure of any tax rules regarding the loaning of money, but from the legal side there could be issues with a company loaning money to a trust. The director should be acting in the best interests of the company and its shareholders so loaning money to third parties with no interest could be problematic.
     
  3. macie

    macie New Member

    Joined:
    21st Oct, 2011
    Posts:
    4
    Location:
    bendigo, vic
    Hi Terry, if the trustee owns share in a business, could they then offset the income from them against the property losses?

    Is there a way to offset untaxed income against property losses, say by issuing unfranked share dividends to the trustee that owns the company?
     
  4. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    Yes, income from one source could offset losses from another. Unfranked dividends would be income too so should be possible. But you should check with your accountant before this is set up