What Is a Trust and Why Do You Need It?

A trust is a type of business structure where a third party, called the trustee, holds and manages assets on behalf of one or more beneficiaries. A trust can be used to protect assets, distribute income, and provide tax benefits. There are different types of trusts, such as:

  • Unit trusts, where the beneficiaries have fixed entitlements to the income and capital of the trust, based on the number of units they hold.
  • Discretionary trusts, where the trustee has the discretion to decide how much income and capital to distribute to each beneficiary.
  • Hybrid trusts, which combine features of both unit and discretionary trusts.

A trust is created by a legal document called the trust deed, which sets out the rules and obligations of the trustee and the beneficiaries. The trust deed may also specify an appointer, who has the power to appoint or remove the trustee. The person who establishes the trust is called the settlor.

What Are the Tax Obligations of a Trust?

A trust is not a separate legal entity and does not pay tax on its income. However, it still needs to lodge a trust tax return at the end of each financial year. The trust tax return shows the income, expenses, and deductions of the trust, as well as the share of net income or loss for each beneficiary. The trustee is responsible for:

  • Registering the trust with the Australian Taxation Office (ATO) and obtaining a tax file number (TFN) and an Australian business number (ABN) for the trust.
  • Keeping accurate and complete records of the trust’s transactions and activities.
  • Preparing and lodging the trust tax return accurately and on time with the ATO.
  • Distributing the income and capital of the trust to the beneficiaries according to the trust deed or the trustee’s discretion.
  • Providing each beneficiary with a statement of distribution that shows their share of income or loss from the trust.

The beneficiaries are then required to include their share of income or loss from the trust in their personal tax return and pay tax at their individual tax rate. The beneficiaries may also be entitled to claim any tax concessions or credits that apply to them.

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How Can MDB Taxation and Business Advisors Help You With Your Trust Tax Return?

At MDB Taxation and Business Advisors, we are a team of professionals with experience in providing all types of tax return services, including Melbourne individual and trust tax returns. We can help you with your trust tax return by:

  • Helping you choose the right type of trust for your business needs and goals.
  • Helping you set up and register your trust with the ATO and obtain a TFN and an ABN for your trust.
  • Helping you prepare and maintain your trust accounts and records.
  • Helping you prepare and lodge your trust tax return accurately and efficiently with the ATO.
  • Helping you distribute your trust income and capital to your beneficiaries in accordance with your trust deed or your trustee’s discretion.
  • Helping you advise your beneficiaries on their tax obligations and entitlements.

Why Choose MDB Taxation and Business Advisors?

MDB Taxation and Business Advisors is dedicated to helping small business owners by offering Melbourne Trust Tax Returns. We are passionate about helping you create your ideal business and achieve your financial goals.

Let us help you by taking care of your trust tax return needs and providing you with clear and concise tax reports. Trust us to help you make the most of your tax opportunities and maximise your potential.
To book a consultation with us and learn more, call MDB Taxation and Business Advisors at 03 9349 1488 or contact us online.