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Benefits and Risks of Setting up a Family Trust in Australia

For many Australians, family trust is a way to structure finances within a household or family. 

While these can be set up yourself, it is advisable to get them set up by a qualified tax accountant, who can help you take advantage of this structure and avoid common pitfalls.

Here are the benefits and risks of setting up a family trust in Australia.

Benefits of Setting Up A Family Trust

1. Protects Your Assets

You can set up a family trust to protect your assets from creditors. The ownership will remain within your trust, so your creditors cannot access your asset. 

2. Lowers Your Tax

You can use your family’s trust to lower the total income tax of your whole family. The trustee can allow more distribution to the family members with lower income tax rates. 

3. Planning for Retirement Savings

It is crucial to plan for your retirement savings. It is easy to accumulate wealth using a family trust due to the flexible structure of family trust. You can use the savings to supplement your superannuation. 

4. More Flexibility in Investing in a Property

It is easy to hold assets within a family trust. This is because a family trust does not have strict rules. It can, therefore, make it easy to invest in a property. 

5. Capital Gains Tax (CGT)

Once you sell an asset, you will have to pay capital gains tax. A family trust, on the other hand, gets a fifty percent discount on capital gains tax for the profits made provided the profit distribution is made to an individual. However, the family trust must have held the asset for over 12 months.

Risks of Setting Up a Family Trust

1. Unintentional Tax Avoidance

It is risky to avoid paying taxes. It is an illegal action. It can, therefore, get you in trouble. It is best to talk to a tax accountant to avoid unintentional tax avoidance.

2. The Name Bears the Legal Burden

Once you set up a family trust, you will be the legal owner. That is why your name will appear on every document. This can be overcome by having a company as a trustee. 

3. Loss of Ownership of Assets

If you decide to manage your assets through a family trust, you will lose ownership of your assets. However, you can still maintain control of the assets. 

4. Additional Cost for Administration

It is more expensive for annual compliance. 

Benefits of Consulting a Professional to Set Up Your Family Trust

Once you decide to set up your family trust, it is beneficial to consult a professional. The professional can help you set up your family trust properly to prevent disputes in the future. 

If your family is looking for a tax accountant to help you set up a family trust in Perth, Western Australia, then contact Griffiths Advisory today.

Phil Griffiths

Phil Griffiths

Bachelor of Commerce
Certified Practising Accountant
Diploma in Financial Planning
Professional Certificate in SMSF
Approved SMSF Auditor

Phil has been the Managing Director of Griffiths Advisory for 29 years, combining his expertise in taxation, business advisory, superannuation, negative gearing, and wealth creation. He also loves an active lifestyle, indulging in surfing, cycling, snowboarding, and spending quality time with his wife and two children.