Navigating Business, Trust, and Corporate Structures

Establishing a trust using family trust accountants in South West Sydney brings with it some significant benefits, including:

• Tax relief

Although family trusts incur maximum income tax rates, any income paid from the trust to named beneficiaries is taxed at the rate applicable to the recipient, which may be significantly lower. Using this common tactic, trustees distribute income among the beneficiaries, allocating more to members with lower income tax rates, thus reducing the overall amount due. 

• Asset protection

If a family trust structure is used to hold the personal assets of any beneficiaries, they are protected against seizure by creditors if required payments have not been met elsewhere. The assets are not available as payment, even if the beneficiary with the debt declares bankruptcy.

• Capital gains tax discount

Capital gains tax is normally payable on any profits from the sale of an asset; however, this amount is drastically reduced on any assets held by a family trust for more than 12 months.

There are some other advantages and disadvantages to this type of strategy, and as your chosen trust accountant in South West Sydney, Bridges & Associates Accountants will ascertain your exact financial circumstances and advise you accordingly.

One of the key differences between traditional business structures and trusts is that a trust is not a separate entity in the eyes of the law and affords some protections and savings not afforded to businesses. However, companies tend to gain access to higher levels of working capital as investors prefer to see their money in businesses that may pay dividends rather than being beholden to trustees and seeing profit distributed among beneficiaries.

Choosing the right corporate structure for your business is paramount as it affects various aspects of its operation. Here's how:

• Tax Implications: Different corporate structures can have different tax rates, benefits, and obligations. Choosing the right structure can help you take advantage of specific tax incentives and minimise tax liability.

• Liability Protection: Depending on your chosen structure, the personal assets of the business owners can be protected from business liabilities, or they might be at risk.

• Capital Raising and Financing: Certain structures, like companies, can make it easier to attract investors or secure external funding.

• Operational Flexibility: Some structures are more bureaucratic and regulated, while others offer more flexibility in decision-making and business operations.

• Succession Planning: The ease of transferring ownership or shares differs across structures. This can be crucial if the business is to be passed on to future generations or sold.

• Credibility and Perception: Some structures, like proprietary limited companies, might be perceived as more professional or credible in the marketplace, which can impact customer trust and partnership opportunities.

Ensuring compliance with regulatory requirements when setting up a corporate structure is vital for smooth business operations and avoiding potential legal issues. Here are steps to ensure compliance:

• Research and Understanding: Start by thoroughly understanding the different types of corporate structures available in Australia, such as sole trader, partnership, trust, and company. Each has its regulations and requirements.

• Engage Professionals: Consider seeking advice from a qualified accountant or solicitor familiar with Australian business regulations. They can provide guidance tailored to your business needs.

• ASIC Compliance: If you're establishing a company, you'll need to register with the Australian Securities & Investments Commission (ASIC) and comply with their regulations.

• Stay Updated: Regulations and laws can evolve. Regularly review and stay updated with the latest requirements from relevant regulatory bodies.

• Maintain Proper Records: Ensure that you maintain accurate and comprehensive business records, including financial statements, tax filings, and other pertinent documents.

• Lodge Regularly: Depending on your corporate structure, you might need to lodge reports or financial statements periodically. For example, companies must lodge an annual review with ASIC.

• Understand Tax Obligations: Different structures have different tax obligations. Familiarise yourself with the requirements of the Australian Taxation Office (ATO) for your particular structure.

• Seek Ongoing Training: Consider attending workshops, seminars, or courses that focus on Australian business regulations. This will help in enhancing your understanding and ensuring continued compliance.

• Regular Audits: Conducting regular internal or external audits can help identify any areas of non-compliance and rectify them promptly.

Remember, while setting up the right structure is essential, ongoing diligence is needed to ensure that compliance is maintained throughout the life of your business.