Family Trusts

Family discretionary trusts retain all the benefits of companies, such as limited liability (provided the trustee is a company), wages to employees and superannuation contributions but not the drawbacks.For example:

• Income is distributed at the trustees discretion rather than being dependent on a fixed shareholding
• In the trustees hands, there is no tax on trust income which is distributed to beneficiaries; and
• Capital gains may be distributed to the beneficiaries. Individual beneficiaries, super funds and other trusts retain their eligibility to 'discount' capital gains received from the trust distribution.

However, they can be costly and complex structures. In addition, similarly to companies, they are not able to distribute losses to beneficiaries.

Other trusts:

Unit trusts

Holders of unit capital usually have voting, capital and income rights in proportion to the number of units. This type of trust is often used in arms length dealings. The major difference to discretionary trusts is that distributions depend on units held.

Fixed trusts Beneficiaries are named in the trust deed and have predetermined entitlements to trust income and/or capital.

Hybrid trusts have the features of a discretionary trust coupled with a fixed stream of assessable income to specific beneficaries (or classes) which can enable efficient estate planning, asset protection planning and tax planning.