I would appreciate if I could get some feedback from you in relation to my proposed structure for my small renovation business.
The background information is as follows:
I currently run a small renovation business with my husband and we run it as two sole traders. Recently, my parents retired and they have no income other than monthly payouts from their super fund, which I believe is tax-free. They are not entitled to any centrelinke benefits and hence if they have any income other than from the superfund they will not be taxed until they reach the threshold limit.
As long as they are not exposed to any liability issues, my parents have said that they can become part of our business, since they have considerable asset base. And when I did some research, setting up a family discretionary trust might be very beneficial in our case in terms of minimising tax. My parents have said they will "gift it back" to us any distribution received from the trust to us. A gift is not taxable in Australia, so I guess I can utilise $36,000 of tax-free threshold, provided that they actually return the money to us.
My Proposed Structure
Discretionary (Trading) Trust with a personal trustee or a company trustee.
Appointing either personal or company trustee will depend on the following:
1. Type of insurance. We have public liability as a sole trader and work cover for a part time employee as that is legally sufficient. Would we need to take out more types of insurances if we did take on the TRUST structure?
2. Licence Issues. We have a sole trader's contractor building licence from NSW Fair Trading. How do we get the licence for the TRUST? Do we need to get the licence for the trustee?
The background information is as follows:
I currently run a small renovation business with my husband and we run it as two sole traders. Recently, my parents retired and they have no income other than monthly payouts from their super fund, which I believe is tax-free. They are not entitled to any centrelinke benefits and hence if they have any income other than from the superfund they will not be taxed until they reach the threshold limit.
As long as they are not exposed to any liability issues, my parents have said that they can become part of our business, since they have considerable asset base. And when I did some research, setting up a family discretionary trust might be very beneficial in our case in terms of minimising tax. My parents have said they will "gift it back" to us any distribution received from the trust to us. A gift is not taxable in Australia, so I guess I can utilise $36,000 of tax-free threshold, provided that they actually return the money to us.
My Proposed Structure
Discretionary (Trading) Trust with a personal trustee or a company trustee.
Appointing either personal or company trustee will depend on the following:
1. Type of insurance. We have public liability as a sole trader and work cover for a part time employee as that is legally sufficient. Would we need to take out more types of insurances if we did take on the TRUST structure?
2. Licence Issues. We have a sole trader's contractor building licence from NSW Fair Trading. How do we get the licence for the TRUST? Do we need to get the licence for the trustee?