Trust distributions & other questions

[thesuperman]

Say you have trusts that only hold investment property.

1. Does the money need to physically be distributed to the (Discretionary Trust) beneficiary's bank account or (Unit Trust) unit holder's bank account? Can it still stay in the trust bank account but only distributed on paper on the trust tax returns?

2. In a trust deed, it says the main beneficiaries which are named, then includes all other family members as "beneficiaries" as a definition of a "beneficiary". One of them being your grandparents. Are there any issues if your grandparents always living overseas? Does it need to physically be distrubuted or only in the trust tax returns? I presume tax would only be liable for them overseas, not in Australia?

3.(a) Minute meetings/resolutions - what's the difference between them?
(b) Exactly what needs to be recorded in the Minutes, is it every little thing? Please give examples.
(c) What about corporate trustee? Does minute meetings need to be done & exactly what needs to be recorded?
(d) Does just one person need to be nominated as a Chairperson & sign the minute meeting, or all the trustees?

4. Family Trust Election - I don't really understand this. Apparently this is something you can do only with Discretionary Trusts? I think this has something to do with quarantine of trust losses.

 

[HotRod]

Not sure, but in speaking to my accountant they can use things like Loan Accounts (I think we're the physical money stays in the trust and a ledger entry used to show it distributed to me, say, but I loan it back to the company, or something like that?) to move money around to reduce tax implications (I think).

I've never quite understood, don't want to, that's what I pay an accountant for.

I might be way off the mark too.

 

[Terry_w]

Sounds like you need some legal and tax advice. Trust distributions are extremely complex. There is a whole book on the subject.

Money doesn't have to physically be paid before 1 July, but the resolution to distribute has to be made.

Watch out with non resident beneficiaries as there will be complex tax issues.

Watch out for beneficiary loan accounts. These will cause problems if a beneficiary died. One of my client's, a trustee, was sued by the executor of the deceased estate of a beneficiary in order to recover the unpaid distributions. Very messy and costly and completely avoidable.

 

[coastymike]

Be aware if you distribute profits from a trust to a company without making the physical disttibution then division 7a applies

 

[thesuperman]

Watch out with non resident beneficiaries as there will be complex tax issues.

Thanks to all who has commented.

Could you please elaborate more about this? What happens with non-resident beneficiaries? I thought they would just be liable for tax in their own country only.

 

[Terry_w]

Thanks to all who has commented.

Could you please elaborate more about this? What happens with non-resident beneficiaries? I thought they would just be liable for tax in their own country only.

Do a google to find the tax rates on non residents, no tax free threshold and the rates are much higher than residents. Trustee will be required to withhold tax probably, and may be liable if not withheld.

Complex area

need to consider the tax aspects in their home country too.