trust loans??????

[bicko]

Ok yet another question.
Hope this helps other people as well.
Dear Dale or anyone else who feels they can help.
What steps need to be taken to lend money from a trust to a benificery?
I have an understanding that the ATO is quite strict on this, so what steps need to be taken by the benificery to pay back these types of loans?

Cheers

Bicko

 

[DaleGG]

Hi

The tax office are not so strict on trusts as they are on companies.

However, I would always ask a solicitor to draw up a proper loan agreement detailing the terms and conditions of the loan between the trust and the individual.

It should not cost that much and will be good protection.

Dale

 

[rodimus]

Is there a benefit of the trust lending money to a beneficiary?

I used to think its more beneficial the other way - for the beneficiary to loan money TO the trust, so the trust can pay interest (which is not taxable).

 

[Patosan]

I used to think its more beneficial the other way - for the beneficiary to loan money TO the trust, so the trust can pay interest (which is not taxable).

Firstly I can't imagine that the interest paid by the trust would be "not taxable".
It must be recorded with other expenses and income and tax paid by the beneficiaries.
Perhaps you could play with the margins to suit a desired result especially if the funds you've loaned to the trust are initially loaned to you personally from a 3rd source.
Loans from the trust to you give your personal bal sheet a liability and make you less of a litigation target.


Next loaning money to the trust does get the money off your personal balance sheet but it's still there in asset form abeit another type. So any unwanted creditors could still sink their fangs into it.
Of course their are various reasons going down either track and as Dale advised a formal loan doc would be best in both cases.

Good luck
To the best of my rather limited knowledge anyway.

 

[Rolf Latham]

Hi Dale

At what point is the ATO not as tough on trusts as they are on companies ?

I read between the lines that trust loan is one thing, and directors loan from the trustee co is treated differently.

Are you saying that Im not going to get hounded for a co taxable interest payment if the trust vs the co lends me the dough out of my service trust ?

ta

rolf

 

[DaleGG]

Hiya Rolf!

There are specific rules within the tax act that can cause loans made to directors can be treated as dividends by the tax office.

There is no (as yet) corresponding law for trusts.

Dale

Hi Dale

At what point is the ATO not as tough on trusts as they are on companies ?

I read between the lines that trust loan is one thing, and directors loan from the trustee co is treated differently.

Are you saying that Im not going to get hounded for a co taxable interest payment if the trust vs the co lends me the dough out of my service trust ?

ta

rolf

 

[bicko]

donation to the blind

Ive been looking at Brett Davies site and found some information.

I am a little confused.

Is the loan coming from the trustee or the trust itself. I am unsure as to whom by law is providing the loan.
If it is coming from the trustee and the trustee is a Pty Ltd then it seems as if it would be treated as dividends.

But if the trustee was just a mum or dad then it would be seen as a normal loan agreement.

But if by law the loan came from the Trust itself then so long as the Trust and benificery had a written agreement as to the terms of the loan then everything would be cosher.

(OK how bout this, you all throw in $50 each and I'll go and talk to an accountant(Dale) and I'll post my findings) lots of laughs.
But seriously $50 could make my life a lot happier.

cheers

Bicko

 

[DaleGG]

Hi Bicko

Let's let everyone keep the $50 and I'll try to answer the questions here. Saves you a visit, too.

Mind you, all donations gratefully accepted and all that rubbish...

Seriously though...

A trustee always acts on behalf of the trust and not in its own capacity or right. So, any loan from the trust/trustee actually comes from:

Trustee Company Pty Ltd
As Trustee For
The Family Trust

And if the trustee is an individual or a couple of individuals then the loan would be from:

Mr & Mrs Mum & Dad
As Trustee For
The Family Trust

No problems should arise and I still suggest a proper loan agreement drawn up by a solicitor. This should avoid problems in itself.

Dale

 

[bicko]

Poetry, sheer poetry

thankyou dale.

You just condensed about 1000 words of mumbo jumbo
into the simple truth.

Grateful Cheers

Bicko

 

[DaleGG]

See. It was worth every cent you paid, too!!