If you are not an Australian resident, and are looking to invest into Australia, then one useful structure you might be interested in is setting up a trust. It is very commonly used for investment and business purposes. A trust allows setting up a company or a person (a trustee) to look after all the business assets for the beneficiaries.
Due to the intricate nature of a trustee and beneficiary relationship, setting up a trust can be a complex and costly process. There needs to be a detailed outline, known as trust deed, that clearly and accurately specifies how the trust needs to be run. This trust deed also outlines the trustee remuneration for all the administration work and trust management tasks they undertake. But on the hindsight, it must be kept in mind that it does help to protect the assets for the beneficiaries. Therefore, for inventors who are not residents of Australia, setting up a trust can be a very prudent financial decision for either themselves or their family or kin.
In a trust, the trustee is essentially responsible for everything relating to the trust. They run all the daily administrative tasks and also decide how the business profit should be distributed to the beneficiaries. They ensure the tax laws and regulations are maintained, the taxes are lodged accordingly and also ensure that the accurate tax returns and tax liabilities are sorted out with the Australian Tax office (ATO). Although, trust is a legal relationship and not an entity, the tax administrations consider it as a taxpayer entity.
How the trust or the beneficiaries get taxed depends on a couple of factors:
It is important to know that there are different kinds of trusts. For the purpose of this blog, we’d only focus on the following types of trusts:
It must be understood that trusts are a great way to safeguard your assets and ensure a certain form of protection from any business risks. But a lot of care must be undertaken when creating the trust deed, since that plays a vital role on how the trust will be operated, including defining the roles and entitlement of every individual included in the trust. Once a trust has been established, it is very difficult to dissolve it and, and any alteration to the trust deed also has severe tax implications. Therefore, if you are interested in setting up a trust, it is recommended that you consult legal professionals to help you through the process.
To sum up, the all the different registrations you need to undertake to set up a trust are as follow:
|Australian Business Number (ABN)||No Cost||Mandatory|
|Business Tax File Number||No Cost||Registered by the Trustee|
|Business Name||$37+||Optional, you can use your own name|
|Pay As You Go (PAYG) Withholding||No Cost||Mandatory if employee is hired|
|Fringe Benefits Tax (FBT)||No Cost||Mandatory if Fringe Benefits are offered|
|Goods & Services Tax (GST)||No Cost||Mandatory if annual GST turnover is worth $75,000 or over|
As a foreign investor another important thing to note is what kind of visas are applicable for you, so that you are able to legally set up a trust. For foreign investors, business visas are currently provided under the Business Innovation and Investment Program (BIIP). There are four classes of BIIP:
In order to understand which 188 visa class is suitable for you, you can seek professional and reliable immigration legal advice. At Path Migration, we have a team of immigration lawyers who are specialists in this field, therefore, if you have any questions please do not hesitate to contact us or book a consultation.
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