Accounting Services - Trusts

What is a trust?

A trust is where a person (trustee) holds and governs property or other assets guided by the terms of a trust deed for the gain of another person – the beneficiaries of the trust. There are four key elements to a trust:

• Trustee: the legally registered holder of the assets, and business manager of the trust. They control and govern the assets. NB: a trustee may be an individual person or an entity, and are able to be sued at any time in regards to the trust.

• A duty in respect of the trust assets: A fiduciary obligation is placed upon the trustee to act in a way that will best benefit the interest of the beneficiaries. The trustee must fulfill a range of duties in regards to the trust assets – these duties are most commonly outlined in the trust deed.

• Trust property:  the property (assets) that the trustee holds.

• Beneficiaries: are the people whom have an interest in the trust assets, and are most often listed in the trust deed – a trustee can also be a beneficiary, however, they cannot be the only one.

Trust legalities and taxation:

From a legal and taxation point of view, the trust is seen as not being a separate entity from that of the trustee. Hence, it does not pay tax in its own right, though they’re still obligated to file a trust tax return (T form) with the ATO each year. Profit (or loss) of the trust is incorporated in the personal income tax returns of each beneficiary after distribution. Also, the trustee is accountable for all debts of the trust.

Trust accounting:

Under the accounting system a trust is seen as an entity detached from the trustee and beneficiaries. Therefore, its financial statements are most often prepared by accountants and bookkeepers.

The area of trusts can be quite confusing but can also have significant benefits if you receive the right advice for your situation. If you have any queries regarding trusts, whether it be the accounting and taxation obligations of an existing trust or if you are looking to establish a new trust structure contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.

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