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Company Tax, Individual Tax, MS Business Central, Not for Profit, Partnership Tax, Payroll Australia, Realestate, Reconciled Blog, Registrations, SMSF Tax, Sole Trader Tax, Training, Trust Tax, Uncategorized
Trust Tax
Company Tax, Reconciled Blog, Registrations, SMSF Tax, Trust Tax, Uncategorized
Australian SMSF Bare Trust Structure
Purpose of the Bare Trust The Bare Trust is set up when an SMSF (Self-Managed Super Fund) borrows to buy property under a Limited Recourse Borrowing Arrangement (LRBA). A separate trustee company (the ‘bare trustee’ or ‘custodian’) legally holds the property on trust for the SMSF. The SMSF is the beneficial owner of the property, even though the legal title is in the name of the bare trustee. Role of the Bare Trust Company The Bare Trust company is usually a special-purpose company with no other role than to hold the property title. It does not trade or earn income itself — all income and expenses flow directly to the SMSF. The directors and shareholders of this company are typically the same individuals who are members/trustees of the SMSF, but that is by choice, not a legal requirement. Shareholders of the Bare Trustee Company The shareholders of the bare trustee company are not automatically the beneficiaries of the trust. Beneficiaries of the bare trust are determined by the trust deed: in this case, the SMSF itself is the sole beneficiary. Shareholders of the company just own the company (which acts as trustee). Their rights relate to the company, not directly to the trust property. Beneficiary in Practice The SMSF is the only beneficiary of the bare trust. The SMSF members (individuals) are beneficiaries of the SMSF, not of the bare trust directly. Therefore, being a shareholder in the bare trustee company does not give you beneficial rights in the property. Those rights flow only through your member interest in the SMSF. The shareholders of the bare trustee company are not beneficiaries of the bare trust. The SMSF itself is the sole beneficiary, and SMSF members benefit through their SMSF membership, not through shareholding in the bare trustee company.
Trust Distribution – End of Financial Year 30 June 2025
End of Financial Year Trust Distribution – The financial year ends on 30 June. Trustees must resolve distributions by 30 June (or earlier if required by trust deed). Document the Trust Distribution Resolution before midnight 30 June, or the trustee may be taxed at the highest marginal rate. Confirm rules on income distribution.Check if income includes capital gains or frank dividends. Then Calculate Net IncomePrepare draft accounts for the trust to estimate:Net trust incomeCapital gains and lossesFranked dividendsAny carried-forward losses Who receives income (beneficiaries), What percentage or amount each beneficiary receives,whether distributions include specific types of income (e.g. capital gains, franking credits). Then consider Tax PlanningAllocate income tax-effectively, minimize tax by distributing to beneficiaries with lower tax rates, consider family members (adults over 18, retired members, etc.). Watch out for Division 7A, Section 100A and minor beneficiaries tax rules. Document of the resolution require. Need Help?Now is the perfect time to schedule your EOFY review with us. We’ll make sure you’re claiming all available deductions, staying compliant, and ready for FY2026. Best Regards,0404 0000 42 [Bashar] from [Reconciled Business Accountants]5/14 French Avenue, Bankstown NSW 2200
Settlor
A trust is created by “declaration of trust” on property of the trust or bypayment of settlement of money by a person called the “settlor” to the personcalled the “trustee”, to deal with trust funds as provided in the deed of settlement. Care should be taken that Settlor of a Discretionary Trust is an independentperson. Settlor cannot be a trustee and cannot be a beneficiary of the trust and nor his spouse or children be beneficiaries. A trustee of trust or a beneficiary cannot act as settlor. The settlor is usually a friend or accountant who helps the client to establish the Discretionary trust. The settlor has no right to income or capital of the trust assets and once the settled sum has been paid by the settlor and trustdeed has beenexecuted, it will have no further role in the trust.
Appointer
Appointer The appointor can remove / replace trustee. The appointor in “de facto” controls the trust, since, if the trustee does not follow the appointor’s directions, the appointor can simply remove the trustee and appoint another trustee. Although You can have a trust without an appointor, but to handle the situations like those arising from the death or insolvencyof trustee(s), naming an appointor is considered advisable.
