Trust Structure

Discussion in 'Accounting & Tax' started by Blackmores, 11th Jul, 2019.

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  1. Blackmores

    Blackmores Well-Known Member

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    Hi guys, we are currently building our second development and looking for another land to purchase. First two projects were both purchased under our trust with a corporate trustee. First two projects did quite well in terms of profits.

    Our trusty accountant advised us to start another company to undertake the project C. As in this structure.

    Imgur

    They mentioned all project risks will be contained within the new company (good for trust protection). If project is quite profitable, paying 27.5% company tax will be better. I heard of people setting up brand new trusts and companies for each project and closing them down when project is finished and sold and taxes paid. Is that a better strategy?

    Thanks.
     
  2. Terry_w

    Terry_w Broker, Lawyer, Tax advisor Business Member

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    Speak to a lawyer for legal advice but generally there would be some residual risk with completed projects even if they are sold.

    A new company should ideally be formed. Perhaps a company owned by a company with the shares held by a discretionary trust or 2.

    But you need specific advice.
     
  3. Blackmores

    Blackmores Well-Known Member

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    Thanks Terry. Our accountant did mentioned this in another email.

    "Regarding the new company, just take note that the Corporate trustee of The Family Trust has to be the shareholder of your new company. So that the trustee can hold shares on behalf of the beneficiaries and receive dividend."

    Is this what you were talking about? Thanks.
     
  4. Terry_w

    Terry_w Broker, Lawyer, Tax advisor Business Member

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    sort of
     
  5. Mike A

    Mike A Well-Known Member

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    terry is talking about interposing another company between NewCo and Trust shareholder. There can be very good reasons for doing so.
     
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  6. Blackmores

    Blackmores Well-Known Member

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    Thanks guys. So the new land will be purchased under our current family trust with the current corporate trustee? Same arrangement as the previous projects

    But now we start a new company to develop the property (pay builders, consultants etc...) and essentially work as a project manager for the trust? And one of the shareholders of this new company will need to be our corporate trustee.

    Does this new company need to be under the trust? Or just a totally separate entity?

    Thanks.
     
  7. Trainee

    Trainee Well-Known Member

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    This statement isnt β€˜or’.
     
    Last edited: 14th Jul, 2019
  8. Terry_w

    Terry_w Broker, Lawyer, Tax advisor Business Member

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    I wouldn't suggest that. What about the risk of liability for previous projects? get some specific advice.