Hi guys,
I am currently carrying on an IT business as a sole trader, and now I'm considering moving to a discretionary trust structure with pty ltd as the trustee. I have been working my way through a few tax/trust books, but I am still lacking some fundamental knowledge that I would appreciate some insight into.
My trust will be carrying on a business, and paying me as an employee / contractor. So I imagine that my clients will be writing the cheques to the family trust, and this will be classed as family trust income. Is this correct so far? I understand that income paid into the trust by clients is untaxed, and is only taxed when distributed to beneficiaries, or alternatively, subject to the penal 'undistributed income' rate of 48.5% at the end of the financial year. Is this still correct?
Assuming that the above is correct, can the trust invest this income into shares / property etc, hold these investments for, say, 3 years, thus avoiding distributing the income or paying penal income tax rates during those 3 years? Or would the penal tax rate apply to 100% of the income even tho it has been re-invested in the interests of the beneficiaries?
I am young (19) and need minimal personal income at the moment, and would like to build some wealth (de-facto super I suppose) for use at a later date. Can this work? If not, is there another structure in which I can achieve the same result?
Kind regards,
Daniel.
I am currently carrying on an IT business as a sole trader, and now I'm considering moving to a discretionary trust structure with pty ltd as the trustee. I have been working my way through a few tax/trust books, but I am still lacking some fundamental knowledge that I would appreciate some insight into.
My trust will be carrying on a business, and paying me as an employee / contractor. So I imagine that my clients will be writing the cheques to the family trust, and this will be classed as family trust income. Is this correct so far? I understand that income paid into the trust by clients is untaxed, and is only taxed when distributed to beneficiaries, or alternatively, subject to the penal 'undistributed income' rate of 48.5% at the end of the financial year. Is this still correct?
Assuming that the above is correct, can the trust invest this income into shares / property etc, hold these investments for, say, 3 years, thus avoiding distributing the income or paying penal income tax rates during those 3 years? Or would the penal tax rate apply to 100% of the income even tho it has been re-invested in the interests of the beneficiaries?
I am young (19) and need minimal personal income at the moment, and would like to build some wealth (de-facto super I suppose) for use at a later date. Can this work? If not, is there another structure in which I can achieve the same result?
Kind regards,
Daniel.