Pay rent into trust bank account?

Discussion in 'Accounting & Tax' started by Jasper, 4th Oct, 2019.

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  1. Jasper

    Jasper Well-Known Member

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    I have a property in a trust. The rent is being paid to my personal bank account.

    Is this correct: i should set up a bank account for the corporate trustee and have the rent paid there? If so, does the rent stay there until we distribute at tax time?

    Thanks.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    breach of trust and no asset protection, tax issues potentially.
    Is the trust a sham?
     
  3. Jasper

    Jasper Well-Known Member

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    Hi Terry.

    I appreciate your quick response. However, the breadth of reply gives me nothing to work with. Which part is a breach of trust? What in my post makes you think the trust is a sham? Wouldn't the more logical conclusion be that I've had a trust setup for me, purchased a property in the trust but no one explained how a bank account should work? Which is what I'm trying to rectify now.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    a trustee is required to segregate trust assets from their personal assets. A creditor could easily argue the trust doesn't exist, or the trustee holds the property on bare trust for you. Did you pay the deposit for the property?
    Get some legal advice.
     
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  5. Trainee

    Trainee Well-Known Member

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    Ignorance isnt an excuse. Lack of expertise isnt an excuse either.

    Who is the trustee? How are you recording the rent payments? Have you passed a financial year end, if yes how was all this recorded in the financial statements.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    This is a common concern with many trusts. No trust bank accounts or short cuts when money is used to settle a property etc. A trust is a relationship and if that relationship just exists in the deed but isnt settled then no trust property may exist. You may have a trust that isnt. A trust requires some key elements to exist in the first place.

    1. Was the deed settled ?
    2. Where are the settlement proceeds for the trust ?
    3. Does the trust hold any assets beyond the apparent title ? - which will be in the trustee name/s

    Its also impossible to argue that the trust has distributed $XXX to A and $YYY to B when all the money through the year has been advanced to A. Makes the distribution resolution look wrong.

    I'm often asked if the bank account or moving money can be simplified. NO it cant.
     
  8. Jasper

    Jasper Well-Known Member

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    So the answers I have now are:
    1. Yes you need a bank account (often labeled as a cash mgmt account by banks like Macquarie)
    2. Yes the rent needs to be paid into that account.
     
  9. Trainee

    Trainee Well-Known Member

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    Not focusing on the right thing. The type of account isnt the important thing. The name the account is in is whats important.
     
  10. Jasper

    Jasper Well-Known Member

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    Name will be "Corp Trustee Pty Ltd as trustee for Family trust name".