Gifts from a trust?

[davea]

i sat down and read Dale's Trust Majic yesterday and had a good laugh about some of the gifts given from the trust.

Anyway i noticed alot of them were capped at $100, now i remember reading that the FBT limit for business is being increased to $300 this FBT Year (use to be $100), so does this mean that gifts given by trusts can now be up to $300 in value? am i going down the correct path here? or these are 2 seperate things

also with the gifts, i know you should record minutes saying why the gifts were given but does it have to be a trust related reason or is

"It was johns birthday, and as trust policy a $99 Giftcard was mailed to him as a present"

Cheers

[Mry]

I have looked at this issue before.

It seems that the ability to give gifts out of a trust depends on the relationship of the gift recipient to the trust. The areas indicating that gifts can be given always refer to an employment relationship. Indeed, the sections relied on refer to the FBT act, and that covers employment relationships.

A trust that has an individual trustee (ie not a company) and running a passive investment such as an investment property or a share portfolio will have an impossible task trying to say they are an employee.

A trust that has a corporate trustee has a stronger argument by saying that they perform their duty as a director to the trustee company. I haven't really tested this.

A trust that runs a business can argue an employment relationship with no trouble at all. Here (https://www.accounting.eknowhow.com/rts/html/s02_article/article_view.asp?id=98&nav_cat_id=127&nav_top_id=55) is an article I wrote on how to give gifts last Christmas.

Last of all you refer to a birthday. Gifts given on birthdays are usually treated as non-deductible because you would have given the gift anyway since it was a birthday. It needs to be in respect of employment, not for private purposes.

[DaleGG]

Hi

The gifts could be given for the individual's contributions in buying a property for or on behalf of the trust; making a good share trade that returned a handsome profit or for a 1,001 other reasons in assisting the trust to generate a good income.

If an employee relationship can be argued, then, a small gift at Christmas time; easter or for a birthday could also be justified.

However, in all of this the focus needs to be on earning an income within the trust and so it is best to leave some of these deductions until down the road a few years when the trust does have surplus funds and profits.

Dale