There is a persistent misconception that only wealthy individuals can establish and uphold trusts to build their wealth. However, this is not true rather, no matter how much money you have, you can maintain trust at your discretion to plan your financial future.
A trust is an arrangement where the trustee holds and manages all the assets on behalf of another party. It includes four elements:
- The settlor: The person who creates the trust and transfers assets to it on your behalf.
- Trustee: The company or a person responsible for managing trust and confirming everything works well. For example, they can distribute money or apply for loans.
- Beneficiaries: They are the people or firms eligible to receive benefits from these trusts, like income or assets.
- Trust deed: It is the legal document outlining the trust details, including the roles of the trustee and beneficiaries, rules for income distribution, and the period of the trust.
Now, the question is in which trusts you should choose to invest your money and assets, how to do so, and where to begin building wealth with them. So, there are two most preferable types of trusts in South Australia i.e.,
Family Trusts Versus Unit Trusts
Family Trusts offer a trust structure where individuals can allocate their assets and income among their family members to maximize family wealth. Conversely, Unit Trusts deal with the division of the trust’s assets into small units, like shares representing a portion of the trust assets for individuals. Further, individuals (beneficiaries) can buy and sell these units and use them to make investments.
However, people in South Australia mostly prefer family trusts because they typically offer more lucrative benefits than other trusts. They offer a strategic way to protect family assets, take advantage of tax benefits, and plan for the property’s future.
But before using them, you must know who can be the beneficiary of the family trust. The family trusts include immediate family members like parents, grandparents, children, brothers, sisters, and a spouse. Further, around 800,000 family trusts were registered, holding over $3 trillion worth of assets as per the ATO (Australian Taxation Office) in October 2024. This shows its popularity among people in Australia.
Process To Set Up a Family Trust in South Australia
You may be thinking that you need to go through the typical process to set up a family trust in South Australia. While this is not the case, instead, you can follow these eight steps to set up your family trust:
Select Your Trustee
Primarily, based on your financial preferences, decide who will control your trust affairs and manage it on a day-to-day basis. You can select anyone as your trustee on whom you can rely at your best for holding your trust property, like your spouse or your parents.
Select Your beneficiaries
After selecting a trustee, select your beneficiaries who will benefit from the family trust, like your children, grandparents, aunts and uncles, nephews, or any other dependent. You can even include companies and charitable corporations as your trust beneficiaries if you want to.
Draft A Trust Deed
Thirdly, draft a trust deed disclosing the overall structure of the family trust, a list of beneficiaries, and the roles and responsibilities of the trustee and beneficiaries. It will also include the allocation structure of your income and assets among beneficiaries, along with the procedure of appointment and removal of future trustees.
Settle The Trust
Then, settle the trust, which is the necessary legal process for the establishment of your trust. In this, you (the settlor) need to sign the trust deed and pay the nominal fee to the trustee, which is usually $10. In this, you may appoint a settlor who is your close friend or someone who will not be required in further settlement proceedings. He will prepare a trust deed for the sake of the beneficiaries.
Signature Of The Trustee On The Deed.
Once you give a nominal fee to your trustee as a settlor, now take his or her signature on the deed. This step will confirm the appointment of that person as your trustee and abide by the terms of the trust deed.
Consider Stamp Duty Procedure
Now that you have established the trust deed, consider the stamp duty procedure. However, in South Australia, stamp duty applies only to limited assets like residential and rural properties. So, you will not be obliged to pay any stamp duty while transferring your business assets, shares, and properties. This is because of the “specie transfer exemption” under the Stamp Duties Act 1936 (SA).
Receive ABN And TFN
In this step, apply for an ABN (Australian Business Number) and TFN (Tax File Number) on the registered website of the Australian Business Register and wait for that. This will confirm your compliance with Australian tax obligations while engaging in business activities like investment in properties.
Open a Family Trust Bank Account
Finally, open a separate family trust bank account in the name of the trustee. This way you can track all your trust financial records and submit trust tax returns meeting all legal requirements. Also, make sure that your first deposit is the settlement sum before any other transaction takes place.
Is it Worth Having a Family Trust in South Australia?
Having a family trust can offer several benefits in South Australia, including building and protecting wealth, making it a great option for financial security. This is because family trusts hold assets in the trust’s name rather than the individual’s name, ensuring better protection and wealth management.
Meanwhile, you can also get tax rebates as per ATO. For example, if you sell your property or business after 12 months, you can get a 50% CGT discount (discount on capital gain). You can also distribute your asset income among minor beneficiaries (under 18), which will help you minimise your tax liabilities.
You can even gain flexibility in income distribution among beneficiaries at favourable tax rates every year. Additionally, you can utilise the bucket company concept, where you can set a company as your trust beneficiary. This will allow you to only pay tax at a corporate tax rate comparatively lower than individual marginal tax rates.
Additionally, you can reinvest your trust income to buy affordable properties, knowing their growth potential in South Australia. You can then use those properties for rent-vesting, where you can rent them to earn a high rental income. Also, by selling them after some time, you can earn capital gains subject to favourable property market conditions.
You can transfer your properties to future generations as per the no-stamp duty norm of the Stamp Duties Act 1936 (SA). This way, you can preserve your wealth within the family with long-term financial security. Additionally, it will help you improve investment capability with higher wealth-building opportunities than in individual ownership.
Sum-Up
Hence, to secure a family future while building wealth, a family trust in South Australia will be a good choice. By just setting up the family trust, you can take advantage of several benefits, including better investment opportunities. However, having professional guidance can make this journey of building your wealth with a family trust even smoother.
You can reach Nfinity Financials, who have the expertise in dealing with different investment plans for you to contribute to your wealth building for your financial future.
For more guidance, contact us at Nfinity Financials or just give us a call at 1300 GET LOAN or 0456 456 267.
FAQs
Q1. Is it necessary to be rich to have a family trust?
No, it is not necessary to be rich to have a family trust. Anyone can set it up, regardless of his or her wealth, to manage assets and estate planning.
Q2. Is family trust better than unit trust?
The choice depends on your financial needs, like asset protection, flexible income distribution, and estate planning.
Q3. Who can be the beneficiary of a family trust?
The beneficiary can be anyone within the family, including children, spouses, parents, brothers, sisters, and grandparents.
Q4. Can a trustee remove a beneficiary?
A trustee can remove a beneficiary at his discretion, subject to the rules and regulations of the trust deed.
