Trusts for Business

A trust is an obligation imposed on a person (the trustee) to hold property or income for the benefit of others (the beneficiaries). A trustee is responsible for the operation of the trust. A trustee can be an individual, partnership or a company. There are a number of laws which govern how a trustee must perform his or her obligations to the trust. The primary obligation of a trustee is to act in the best interests of the beneficiaries of the trust.

A formal deed is required to set up a trust. A trust deed outlines the purpose of a trust, the property involved, the rights and obligations of the trustee and beneficiaries and how assets will be distributed to the beneficiaries. It is recommended that a trust deed be prepared by a solicitor.

A trust must have its own Australian Business Number (ABN), which can be obtained online through the Australian Business Register.  

A trust must also have its own Tax File Number (TFN), which can also be obtained online from the ATO.

A trust must be registered for GST if annual turnover is $75,000 or more.

Trusts that run a business must complete a tax return, showing the income the trust earns, deductions it claims, and the amount of income distributed to each beneficiary.

A trust might be an appropriate structure if a business venture will involve a sizeable amount of property and money. That is because a trust can be beneficial in protecting assets and minimising taxation obligations. Trusts are also a common structure choice for family businesses because various family members can be made beneficiaries of the trust that is operating the business. 

A trust is the most complex of all the business structures, with complicated tax implications and legal and compliance requirements. As such, it is highly recommended that advice is sought from a solicitor to check whether a trust suits your circumstances.

Tim Hayter, Principal, Mid West Lawyers

This information is general in nature and should not be relied upon as legal advice. Formal legal advice should be sought for your particular circumstances.