Setting up a Foundation

[Scott No Mates]

Can any bright spark expand on whether you can use a Foundation effectively in any capacity eg in lieu of a corporate trustee? Does it provide any asset protection? or is this just some hair brained scheme put forward by a mate's accountant (no ABN, no collection of GST, no annual reporting or formal requirements for bookkeeping/accounting or tax returns)?

 

[Paul@PFI]

What do you mean by a "Foundation"? That is not a word that exists in Australian tax law. Not For Profit and Charitable entities are highly regulated by State and Commonwealth laws. Some of these have a name that includes the word foundation as they maintain a fund for the advancement of their cause.

A Trust is managed by a trustee. A NFP can be the trustee of a trust - The likes of The Red Cross do this.

Charitable foundations have accounting and tax records even if they pay $0 tax. They must account for their use of the proceeds received under their constituent purpose. To think that they are some immune entity is just ...I'm trying to find the right word...Stupid, insane, nieve ?? Hair brained doesn't do it justice. The Constitution of Australia is one of the few pieces of law that provide tax immunity to some.

ALL enterprises incl charities etc must have an ABN. It is an identifier. What you describe sounds like a illegal scheme based on VERY foolish beliefs or a attempt to scam and deprive someone of their money. Beware... A fool and their money are easily parted.

I would report the entity to the ATO. They are probably (not always) on the radar. The docs provided is a scheme at best. Crimes Act would apply.

 

[Scott No Mates]

Thanks Paul.

I usually carry a sack of salt around which acts as a good bs detector (& this guy is a few sandwiches short of a picnic when it comes to hair brained schemes).

I will run that one out again on April fools day for good measure.

SNM

 

[Paul@PFI]

You may be surprised but the promoters of scheme like these rely on several factors:
- Blatant : They usually claim every other professional is conservative or ignorant and that the premise of the scheme is long standing and used by the wealthy in abundance. They may refer to common law, English law or other intangibles that seem very skilled. Reality it you cant check. One of their arguments is that their scheme is obviously legal.
- Secret : Don't share it. (They don't want to get caught !). Reality is that they don't want others to review this scheme and provide advice. They are scammers. They want fast results and your $.
- Use a bait that is based on a factual lie. Of course GST doesn't apply if you don't register and then provide a false declaration using the ATO forms you aren't entitled to complete !! (They ignore the No-ABN withholding rule). How obvious.
- Don't give professional advice !! This is the one that always gets me. They say their info is not tax advice when it is. This poses no real issue since promoters are often failed tax advisers who are de-registered or former tax advisers.
- Haste : You will need to act quickly. If it was legal you could take your time ?
- Cost : The fee will be substantial.

 

[Terry_w]

I know nothing of foundations but they would be similar to a trust in that they are not a separate legal entity but a relationship between people who hold money for other purposes - often charitable. No asset protection.

 

[perthguy]

I know nothing of foundations but they would be similar to a trust in that they are not a separate legal entity but a relationship between people who hold money for other purposes - often charitable. No asset protection.

Looks like a legal minefield. According to the ATO, a non-profit organisation could be a trust, unincorporated association, incorporated association or a company limited by guarantee. Could some of these structures afford a level of asset protection? This would require specialist legal and tax advice.

https://www.ato.gov.au/Non-profit/G...fit-organisations/Choosing-a-legal-structure/

 

[Paul@PFI]

Guys there is no asset protection. Its a tax scheme. A really bad one at that.

One of those - The Govt isn't legal, Magna Carta, yadayada crazies. Tax is unconstitutional - You know. Use a foundation and tax will disappear...Yeah.

 

[perthguy]

Guys there is no asset protection. Its a tax scheme. A really bad one at that.

Agreed. The FAQs is a real mess of badly applied non-profit and tax law in Australia. It seems to have picked up some ideas from the US and badly applied them to Australia. It doesn't look like it is going to work here. The basic premise is that you set up a non-profit organisation and operate your business through it. A major problem in Australia is that according to the ATO:

A non-profit organisation is an organisation that is not operating for the profit or gain of its individual members, whether these gains would have been direct or indirect. This applies both while the organisation is operating and when it winds up.

Any profit made by the organisation goes back into the operation of the organisation to carry out its purposes and is not distributed to any of its members.

https://www.ato.gov.au/Non-profit/G...-of-non-profit-organisations/#NPorganisations
I don't see how a group of individuals could obtain any kind of tax benefit from the above arrangement.