Corporate Trustee Family Trust set up

I am in the initial stages of setting up as a mortgage broker, but want to ensure safe tax structures are in place.

- Do brokers normally required GST?
- If i am going to do the above, do I set up an ABN or an ACN? or is it a company ABN that is linked to the corporate trustee?
- If I set up a family trust, and say my spouse wants to start up his own company with his own corporate trustee, can this be set up under the same trust or would he have to create a seperate trust (for asset protection)?

 

Yes brokers need to register for GST
A company will always have an ACN and a trust will need an ABN if conducting a business.

You need to know that a company is a separate legal entity and a trust isn't but it is a separate tax entity. If your spouse wants to set up a business they could consider having the corporate trustee operate the business but there are a lot of legal and tax issues to consider.

It sounds like you haven't sought legal advice.

 

Brokers have zero involvement in tax and also legal issues. No broker should be addressing your structure. Not even sure where GST comes into the question. Why would that be important ?

You need tax advice ...and legal advice. You questions actually indicate some serious misunderstandings. eg The trust will be setup with a trustee which may be a company. It isnt done afterwards. The reasons why you are even considering a trust need review. Trust financing is slightly more difficult or limited than person borrowing and that may also be a issue. A trust may not save a cent in tax, can lead to losses being quarantined or lost and could even add to land tax and also tax prepration costs without a benefit.

 

Sometimes you wonder how much time people spend reading, and how much time typing.

 

Check the cost of unwinding structures before you set them up. Sometimes we see new people start a business, pay a lot in advisory fees for complex structures, splutter along with a business idea, and then pay a lot more again as they shut the complex structures down.

One viable option for some people is to just be an employee without administrative paperwork. You should also consider future flexibility in restructuring later on with the small business restructuring options.

Neither of these options work for all - but I will always choose a simple solution compared to a complex one if the outcome is the same.

 

And some of these are advisers who peddle complex stuctures for big $$$. When you sell a complex issue it sounds ...complex and expensive. Sometimes its just confusing. Its expensive sheets of A4 paper.

I am stunned how often a client has a trust setup and they cant tell me who the trustee is. Or where a signed copy of the deed is.. it shuld be in my emails they all say. Its never signed. I recently encountered someone whose lender asked for a copy of the stamped deed. He didnt even know what that meant. He was lucky we had a COPY of the signed deed.

Of concern is the Commonwelath Govt allowing people to setup a company online for the ASIC lodgement fee alone. It gives them a ABN at the same time as formation on the cheap. . It defaults to a "owner" share class...whatever that may be. But there isnt a constitution and so how can replaceable rules deal with a class of shares that dont exist ?? What rights do those shares have ? The company ends up with a single Director, no constitution, one shareholder in "OWN" class and nothing paid for the shares which emans that nobody can vote ....with no registers required by the Corporations act and no consents or other statutory records. And no advice on what they should have done.

 

I am setting up as a SE mortgage broker so want to get appropriate tax structures in place to ensure asset protection. I will be seeking further tax advice, these are just general queries as I was getting myself confused

 

If I type these questions it's because I don't understand what I am reading lol I'm not an accountant

 

Exactly this, I have had a couple of accountants tell me to set up a trust with a corporate trustee to act as the trading entity. I have also been told by a few mortgage brokers they operate just under a company ABN with themselves as the director. I just want a safe way to protect my personal assets without complicated things and without it getting too expensive

 

Tax structures?

These are legal issues - nothing to do with accounting.

 

I find this hard to believe. Are you saying that the majority of brokers are sole traders?

 

No, they have their ABN set up as a company not sole traders, I only know of two that do it this way..definitely not the majority

 

Well seeing as you are a mortgage broker yourself, can I speak to you to discuss how to go abouts setting this up safely? Tax advice, not legal.

 

I am no longer working as a lawyer.

 

Protect from what ??

Fred Smith is a neurosurgeon. Fred is a specialist who works at a small number of private hospitals. Fred operates as a sole trader because he is not legally allowed to do anything other than that. Fred has a trust but his home is owned by his husband, Steven. The trust accumulates investments etc and also pays for the upkeep of the home from entitlements to beneficiaries such as Steven. Fred isnt a Director of the trustee company. Steven is, as well as Freds close sister Elaine. Fred is the appointor to the trust and still keeps a eye on things the Directors do. Elaine also works for Fred as his adminstration assistant. Freds major concern based on legal advice is he can kill or injure patients and be sued. He has insurance for that of $20million. All lawyers know its $20m. As he has few assets his legal advisers consider his need to consider bankruptcy IF a claim was to exceed $20m is minor. Fred also knows his insurer engages a major law firm to defend any claim and they do this aggressively at no cost. His solictors consider his assets have asset protection but this wont prevent a claim. Fred hopes that a claim will be under $20m as that may be the easiest path for a affected patient. Fred also takes consolation that in his line of work death tends to occur before disability so claims are typically lower. Fred doesnt take on his didability risk suregy and leaves this to another neurosurgeon he knows. Fred has a SMSF which owns two of his practice suites which he pays a market rate of rent to. These are in prime locations incl a city suite and one near a major hosiptal. There is no debt. The legal advice is that the SMSF would not be liable to a claim and is well protected. Hence Fred and Steven super is approx $2.6m and still rising and is a major safety net for them. Fred and Steven are saving funds in the trust to consider a interstate coast holiday home. This will be owned most likely by Steven but they will seek legal advice prior to any contract.

John operates a small business. Its a hardware store. Most suppliers seek a guarantee when John opens a trade account although he never keeps track of that and even forgot he did it. The hardware store is a Pty Ltd company and John is sole Director. Its not trading well and John has possibly even traded while insolvent and its barely keeping up with deferred payments to suppliers and the ATO account is now quite high since they usually willingly allow deferred account arrangeents. One day John finds the sore he rents chained and locked. The owner has taken action to terminate the lease. John seeks legal advice and advice on insolvency. He learns that he may be personally liable for debts while insolvent and also for debts he guaranteed. He thought a company gae asset protection. That what he read n a forum. Johnw as wrong. John now needs to tell his wife they could face massive claims for debts that may be waht his unencumbered house is worth. Its in his name. They also have a holiday home in joint names and those costs were up to now also being paid at times by the company as he didnt have the funds. The lawyers are also concerned that could expose that property to a claim as well. His soliictors also ask about unpaid PAYG withholding and super and John says this is approx $240K and he learns that the ATO can enforce that debt on him using a thing called a "Directors Penalty notice" which is a simple lettter. This converts the debt from being a company debt which he thught may go down with the ship if liquidated .... to also being a personal debt. . John starts asking about bankruptcy advice as well as seeking advice on appointing a company administrator.

Lesson - Insurance and legal advice may assist. Accountants cant give legal advice. What we should do is say STOP and ensure the client gets the right legal advice.