Jun 07
Trust Distributions – Who can you distribute to?
Posted by Peter Marmara-Stewart at Tuesday, June 07, 2016
If you are a small business who uses a Trust, there are a number of people that you can distribute to with a discretionary trust.
These include:
- Children
- Parents
- Parents-in-law
- Brother & Sisters
- Grandparents
- Grandchildren
Children & Grandchildren
You can distribute to children who are minors only $416. That might not seem like a lot but if you have 3 children and you are in the 49% tax rate that works to being $611.52 in tax savings.
If you children are over 18 and studying at uni or are not really earning an income you can distribute up $20,542 and they will pay no tax. At the 49% tax rate that is $10,066 in tax savings. If we increase that to $37,000 they will have $3,456 in tax to pay and your net tax savings will be $14,674.
Brothers & Sisters
If you have brothers and sisters that are studying at uni or are not really earning income you can also distribute to them in a similar fashion as above. Just make sure no one else is doing the same thing!!
Parents, Parents-in-law & Grandparents
If you have parents, parents-in-law and/or grandparents that are self-funded you might be able to distribute to them in a tax effective manner.
How do you take advantage of this?
You need to have a Discretionary Trust, with income and you need to be a small business.
FAQ’s
Do I need to pay the distribution?
Yes you will need to pay the distribution.
What if they receive Centrelink?
If who you are looking to distribute to receives Centrelink then this strategy is unlikely to work for you.
These include:
- Children
- Parents
- Parents-in-law
- Brother & Sisters
- Grandparents
- Grandchildren
Children & Grandchildren
You can distribute to children who are minors only $416. That might not seem like a lot but if you have 3 children and you are in the 49% tax rate that works to being $611.52 in tax savings.
If you children are over 18 and studying at uni or are not really earning an income you can distribute up $20,542 and they will pay no tax. At the 49% tax rate that is $10,066 in tax savings. If we increase that to $37,000 they will have $3,456 in tax to pay and your net tax savings will be $14,674.
Brothers & Sisters
If you have brothers and sisters that are studying at uni or are not really earning income you can also distribute to them in a similar fashion as above. Just make sure no one else is doing the same thing!!
Parents, Parents-in-law & Grandparents
If you have parents, parents-in-law and/or grandparents that are self-funded you might be able to distribute to them in a tax effective manner.
How do you take advantage of this?
You need to have a Discretionary Trust, with income and you need to be a small business.
FAQ’s
Do I need to pay the distribution?
Yes you will need to pay the distribution.
What if they receive Centrelink?
If who you are looking to distribute to receives Centrelink then this strategy is unlikely to work for you.