Borrowing to distribute?

Honestly... I have a general understanding on how a trust works and accounting. Was just trying to troubleshoot a scenario before I raise it further with my accountant. At a quick glance I got several different answers and the possibility to do what I want was not ruled out so I don't understand why you felt the need to provide your response. I'm unsure what the forum is for if you don't think I can ask a question to get some feedback prior to raising it with an accountant.

 

It's a DT/CT set up, though I have to start expanding the set-up a bit more to start developing outside of the DT into a seperate company with shareholder being DT

 

This was my initial thoughts, but thought I'd ask anyway, what rare circumstances could give rise to it being income?

 

doesn't make sense to have a consulting business in your current setup, you aren't going to have the ability to retain earnings, no advantage of your current setup vs company with DT/CT as shareholder since you won't need 50%CGT discount for a small consulting business

 

I can retain profit through the use of a bucket company.

The reason I use DT for the business is for discretion on distribution not for CGT. Yes I am aware of PSI.

I use DT for investments being held for CGT.


Yes though I could move the consulting into a Company owned by the DT and would all work well. As I said I need to start expanding on my current setup. It worked when I started due to operational costs and i wasn't yet developing.

 

Unusually contrived surrounding circumstances may indicate a payment in substitution for income.

However, a much more common situation is where you have a bucket company with an unpaid present entitlement. You did not mention use of one of these until very late in the thread. Division 7A deemed dividends are usually unfranked which means double tax to the beneficiary and no deduction to the trust/company.

 

Bucket company not in place yet. Will need for next FY.

It seems to m the safest course will be to retain earnings until FY18 and distribute to spouse then with franking credits via the DT.