Join Australia's most dynamic and respected property investment community

can an accountant set up a trust?

Discussion in 'Legal Issues' started by Hodge, 25th Jul, 2016.

  1. Hodge

    Hodge Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    511
    Location:
    Melbourne
    Went to see my accountant today and he advised me to change the ownership of my business from sole trader to a trust with company as trustee. Mainly due to asset protection and tax saving.

    I remember reading on SS or property chat (can't recall which one) that a solicitor should be used to setup trusts and not an accountant. Does this sound right or have i interpreted it incorrectly?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,544
    Location:
    Sydney or NSW or Australia
    Accountant for tax planning but solicitor for the legal aspects
     
  3. Hodge

    Hodge Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    511
    Location:
    Melbourne
    @Scott No Mates thanks for the reply. So what i read was right? Any reason why not to use an accountant to set one up?
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,544
    Location:
    Sydney or NSW or Australia
    @Hodge - If the goal is asset protection, then a solicitor is in the best position to advise/set up the trust deed @Terry_w however it's best to have both in a room to address all issues.

    If you're after advice, best not skimp on it and stuff it up (which is more costly to rectify)
     
    Pumpkin, Player and Hodge like this.
  5. JacM

    JacM VIC Buyer's Agent Business Member

    Joined:
    12th Jul, 2015
    Posts:
    1,106
    Location:
    Melbourne, Australia
    No, but often accountants will order it (with the solicitors) on your behalf.
     
    Westminster and Hodge like this.
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,949
    Location:
    Sydney
    An accountant can only advise on the tax aspects. They will get a deed prepared by a lawyer and put some names in - but cannot change anything or advise on the terms of the trust or even who should take what roles.

    If you want asset protection advice see a lawyer. Asset protection involves advice in following areas of law
    Conveyancing act
    bankruptcy act
    corporations act
    trustee acts
    family law acts
    succession acts
    common law
    equity
    litigation

    I have seen people with trust set ups that offer virtually no asset protection at all.
     
    Perthguy, Hodge, York and 1 other person like this.
  7. Greyghost

    Greyghost Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,259
    Location:
    Melbourne
    Sorry don't agree..
    @Hodge
    Accountants (any that are worth their salt) provide structuring advice on a daily basis...
    30% of my workload is advice on structure and re structuring.
    Correct the accountant acts as an intermediary and gets the deeds prepared by an external company, such as Top Docs or ACIS Etc

    So yes your accountant should be able to facilitate the establishment of a trust for you.

    If not PM me...
     
    HUGH72 and Hodge like this.
  8. Hodge

    Hodge Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    511
    Location:
    Melbourne
    Thanks to everyone that replied - it all makes sense now. I can't remember the exact figure but accountant quoted me $2200 to set up and roughly the same cost to maintain each year. Seems to me I'm better off staying as i am as any tax savings is eaten up by fees and on going costs to manage the trust.
     
  9. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,569
    Location:
    Adelaide, SA
    Depends on the accountant, some are fine with this.
     
  10. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,091
    Location:
    Melbourne, Nationwide
    Most people go to their accountant to set up these types of structures. The accountant gets a solicitor to do it, which really means in most cases they simply take an off the shelf product and get the accountant to sign a few documents. $2200 for the bill seems about right for a company and trust.

    Make sure you understand why this structure works best for you and your longer term goals. Trusts are very useful if used properly in this context, but it's not the best structure for every business. Make sure the accountant understands where you intend to go with this business and plans accordingly.
     
    Hodge and Greyghost like this.
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,949
    Location:
    Sydney
    There is no legal basis for an accountant or a tax agent to set up a trust. There is caselaw stating that this is legal advice and it is unclear if a non-lawyer's PI insurance would cover any stuff up.

    Accountants will no doubt object to this view, saying they are not providing legal advice, but just ordering - but why use an accountant (and not a hairdresser) and not go direct to a lawyer?
     
    Perthguy likes this.
  12. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    1,647
    Location:
    Sydney
    Are you sure this is the best structure? Will you be trading inside the trust? Will you be holding other assets inside the trust?

    You don't want to be operating your business from the trust if you also hold investment assets inside the same trust.

    A company with shares owned by the trust with a (non trading) company as trustee may offer better protection and more flexibility - since you can hold other assets inside the trust for protection as well.

    What about your exit plan? Would you ever sell the business as a going concern? Take on investors?

    I'm not sure if operating a business inside a trust structure will impact on your flexibility in this case - but then, depending on the nature of your business, it may not be an issue.

    Obviously this is not advice - just some things to consider.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,949
    Location:
    Sydney
    If you want asset protection did your accountant tell you about the anti-avoidance provisions in the conveyancing act, and the bankruptcy acts - s120,121,etc and how to structure the transaction so as to improve asset protection.

    Also as Sim mentioned a trust may not be a good idea for a business - A company with the shares owned by a discretionary trust may work better - shares can be sold rather than the business.
     
    Perthguy likes this.
  14. Hodge

    Hodge Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    511
    Location:
    Melbourne
    @Simon Hampel Yes i will be trading inside the trust. All other asserts (properties) are in my name and wifes name (50 / 50). I won't be holding any other assets in the trust.

    Not really sure on the exit plan this stage as not sure anyone would purchase the business. I think it would be more beneficial if i sold off the machinery rather than the actual business.

    The whole structure was brought up as a way to save tax and as a bonus asset protection but mainly to save tax.

    It just seems to me a lot more headaches for little saving.
     
  15. Hodge

    Hodge Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    511
    Location:
    Melbourne
    To be honest he may have but after half an hour it all became a blur!! Easier to learn Chinese in week. It needs to be simplified so everyone understands.
     
  16. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    1,647
    Location:
    Sydney
    I think you need to try and quantify the costs / savings and identify whether it is worth it.

    Given you have assets in your personal names, putting the business in a trust isn't necessarily going to protect you from much. If you are personally held liable for something (as a director of the business), the business being in a trust won't help at all.
     
  17. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    1,647
    Location:
    Sydney
    If it was simple then you wouldn't need them and they'd be out of a job :p

    Seriously though - please don't sign anything until you do understand what you are getting into!

    In my experience, people get themselves into trouble when they blindly listen to their advisers but don't really understand enough to know what questions to ask to ensure that the advisers are doing what really is the best thing for you (and not just what the adviser thinks you've asked for).
     
    hobo likes this.
  18. Hodge

    Hodge Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    511
    Location:
    Melbourne
    This is what my accountant told me as well but only if i breach my duties as a director - ie trading while insolvent.

    I guess at the end of the day it's a matter of how deep are their pockets.
     
  19. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    1,647
    Location:
    Sydney
    There's no chance that your customers could sue you?
     
  20. Player

    Player Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    349
    Location:
    Paradiso
    Check with your accountant and a lawyer, however if it is only likely that the machinery will be of some value, you might consider two entities. One to run the business and one to hold the assets such as machinery if they are valuable. One entity could lease the equipment/machinery to your business entity that provides the service, product etc. This might seem like overkill however if your business gets sued your (valuable) equipment may be at stake.
    This isn't advice, merely opinion, however maybe worth asking about.
     
    Terry_w, Hodge and Simon Hampel like this.