Ok, we know both structure have their advantages and disadvantages, when it comes to costs and asset protection. Though this is not an issue which bothers me right now, I am just curious (and for my own learning), that:
-At what stage will having a trust be better off than having a company?
-What are the likely scenarios that wold favor a trust over a company?
Thank you for the enlightenment.
PS> I suspect that some accountants would advocate for trust set-ups (even when a company would suffice) simply because to their own benefits? (cost of setting up and higher maintenance, that is). Right? Wrong?
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Cost of setting up a trust may be slightly higher than Company (about $300 more), but it is an one-off expense. The recurring cost of maintaining a trust is not higher than Company, unless a complex structure of a combination of trust and Company is used. Accountants favors trust mainly because:
- The ability to access CG concessions, while Company is not entitled to any. People generally don't realise this until they sale their assets in the future.
- Offers greater asset protection compared to Company.
It is a poorly understood area by many accountants. but i don't believe most accountants ask their clients to set up trusts because they want to make more money out of their clients.
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Just to clarify, by CG concession, i mean the 50% discount.
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Hmmmm...in that sense, why don't most companies convert to trusts? It seems there are way more companies than trusts?
Also, i heard there are some crackdowns with misuse of trusts for tax evasion by ATO?
And how big a company would be to start considering trusts?
Thanks for the enlightenment, certainly enriching.
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Converting into trusts triggers capital gain unfortunately
Like i said trusts are poorly understood, in fact, Company are often used as a easy way out by some accountants.
Personally, i will always recommend trusts for investment/asset holding entity, Company is fine for a straight foward trading entity.
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很多人是成立 trust，然后trust来设立不同的company。
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我想你说的是TRUST的TRUSTEE是COMPANY？
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1. What if the trustee is a company? Any CGT concession?
2. Is that Trust is an agreement whereas company is a legal entity?
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1. yes
2. no, they are both entities on their own right
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May I know how the assets to be protected in terms of Trust?
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If assets are owned by the trust, you may for example, set up the trust in a way that the beneficiaries are not specified. so if you get into a legal battle, your assets which sits in the trust will remain untouched.
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But is trust still better if there are not many beneficiaries to whom the profit can be distributed to, especially for those who don't have a big family.
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find a seat in this classroom
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Whether to choose between trust & company, has to be assessed on a case by case basis. Even when you decide to go with trust, accountant has to make a decision as to what type of trust is most suitable to you. If you are the sole beneficiary of the trust, you may consider using trust as a asset holding entity, while you run your business through another structure. before you go down this path, you may have a medium - large business, or a small but very risky business, or you simply have significant amount of investment that you want to protect them regardless.
I am certainly not saying trust is better than Companies in every aspect. consult with your accountant before choosing the right entity for you.
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