Commercial Law – Trusts

Many Australian small businesses and larger corporate holdings take advantage of trusts to maximise the effectiveness of their commercial arrangements. 

Not only can the structures be set up which are tax effective, considerable flexibilities and controls can be used creatively. 

A trust is a type of legal relationship. It governs how a person may deal with property. A trustee is the person holding the property, that is, the person with legal title.

A beneficiary is the person with rights to enjoy the property. A settlor is the person setting up the trust by giving the property to the trustee. 

A Trust Deed sets out the terms of the relationship between the trustee and the beneficiary with respect to the property. It usually describes what the trustee may or may not do with the property and the rights of the beneficiaries.

A Discretionary Trust is drafted to give the trustee maximum flexibility (discretion) in deciding which beneficiaries benefit and to what extent.

A Unit Trust is usually drafted to ensure that benefit is regulated according to the number of units held.

Provided the trustee distributes income in any financial year to beneficiaries, the trustee is not required to pay income tax on that income; however the beneficiary must.

Using trusts in business and Not for Profit arrangements can have significant benefits but complete advice must be taken before any decisions are made.

Contact Matthew Turnour for more information.

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