Cost to close down family trust

Hello people,

Just a quick one...another trust question i know

Trust has been open for around a decade and never lodged an annual return. All assets have been distributed to beneficiaries already.

Rough indication of costs and tax liability to wind things up? Also i think there may be some penalties for not lodging annual returns on time?

Ta.

 

To close the the use you will need to complete all of its tax returns.

The costs vary greatly depending on what activities the trust has done.

If you have done the trust distribution minute and properly distributed the income of the trust: the trust will not pay tax. Only the individuals who have received the income pay tax.

If the trust has never done anything just call the ato and let them know.

Ross

 

If all property has already been distributed then the trust no longer exists.

There may have been CGT events in prior years when beneficiaries became absolutely entitled to trust property. This affects both trustee and beneficiaries. All income from that property should have been in their own returns from that time onwards, even if this predates actual 'distribution'.

 

Thanks Gents!

Basically, in a nutshell:

2m in assets of property and cash were in the trust left over from a deceased estate.

Property was transferred to beneficiaries with a cash balance of approx 200k left over that the trustees distributed themselves for their own benefit or expenses, who knows.... The beneficiaries should have seen the cash left over but it never happened.

So I presume the trustees will be liable for individual tax for the 200k before the trust can actually be closed down?

Hey Rob, how do you mean the trust no longer exists? There's still a bank account active that I believe would need to be reconciled and closed down alongside the tax returns?

 

If it is a deceased estate the trustee can pay tax for 3 years as if the trustee is a natural person.

However if the estate is 10 years old and the assets generated income the trustee should have been lodging returns and distributing income of the estate to the beneficiaries.

If income was not distributed beyond the three year grace period the estate will incur tax on its income at the highest rate.

Quite often estates that take a long time to windup will make distributions of income along the way. If this was done properly the trust will not pay tax.

It is just a matter of getting the returns prepared and lodged. Their might be fines but if you have a reason beyond the control of the executor for late returns then you can make a case for waiver.

The late fines might be up to $850 a year.

 

Thanks Ross!! =D

No income was ever generated really, all assets were disbursed pretty much within the 3 year initial period from trust formation.

I think it may be safe to say that $1k per year at the minimum in terms of accounting costs/fines....

 

Under trust law a trust must have 3 things one of which is property. If there is no property there is no trust. What is in that bank account?

 

Terry, Hi.

The bank account just held funds that were the $ difference between the sale of the property and purchase of another.

 

Letme rephrase that: What is in that bank account now?

 

Terry, Hi.

Nada. Zilch. $0.

 

If there is no other assets, nothing held in person by the trustee, then the trust doesn't exist.

A trust is just a relationship where A holds something for B (with obligations).

But administratively the trustee will need to lodge tax returns, cancel ABNs, pay bills etc.

 

ahhh excellent!

And if the trust never had an ABN? Technically no tax returns required? what about winding up the bank account and any other reconciliation required?

 

If no ABN then nothing to cancel. Not sure if TFNs need to be cancelled. Trustee is still liable for any debts - personally.

 

If the trust generated less than 6k a year within three years of death a tax return is not required.