I own a small business (cleaning), and for the first time in years I have the mortgage paid off and a bit to invest. Last week my accountant had me set up a family trust, costing me just over $2,000. So you can imagine how shocked I was this week when I heard Bill Shorten talking about killing trusts! Should I take my money out again, or leave it in, or what?
You’re a bit early aren’t you, cobber?
I mean (Tony Abbott) hasn’t even called the next election and you’re acting like it’s a done deal!
Now, Bill Shorten’s argument is that it’s unfair that people who use trusts can split their income to lower their tax, whereas everyday workers can’t.
Fair enough. It’s actually pretty hard to argue with that.
Yet the ability to split the trust income with unemployed members of your (adult) family is really only a small side benefit to having a trust. (How many of these family members do you have?!)
The main reason you would have a trust is to protect your assets. The second is to avoid getting whacked with the top marginal tax rate. See, even with these proposed changes you still have the ability to cap your tax rate below 30% (versus the top marginal tax rate of 47%) by distributing income from the trust to what’s known as a ‘bucket company’ and then using the franking credits to eventually lower your income.
Anyway, back to your question. The bottom line is, trusts have been around since King Henry VIII … they’re not going anywhere!