Paul Freed, Principal, Freed Legal
Stephen Hardy Special Counsel, Bernie O’Sullivan Lawyers (Vic)
Currently updated by Roger Wade, Director, WadeLegal (Qld)
Originally authored by Warren Wackerling, Senior Associate, Holman Webb (Qld)
Currently updated by Eric Ross-Adjie, Principal and Andrea Keri, Principal, Warren Syminton Ralph (WA)
Originally authored by Alan Karp, Partner, Karp Steedman Ross-Adjie (WA)
Martin Lovell, Director, Laity Morrow (SA) and Adjunct Lecturer, Flinders University of South Australia (SA)
Tim Tierney, Principal, Tierney Law (Tas)
Currently updated by Lyn Bennett, Consultant, Minter Ellison (NT)
Originally authored by Leon Loganathan, Managing Partner; Emma Farnell, Lawyer, and Billy Tarrillo, Lawyer, Ward Keller Lawyers (NT)
Alice Tay, Partner; Eve Martin, Associate and John Birrell, Law Clerk, Meyer Vandenberg Lawyers (ACT)
Structuring for business
Broadly speaking, there are nine different types of business structure of which trusts are a popular choice. The various structures are:
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sole trader;
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partnership;
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joint venture;
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corporation;
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limited partnership;
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discretionary trust;
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unit trust;
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hybrid trust; and
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partnership of trusts.
See Business structures compared.
Advantages of trusts
Using trusts can give a business owner access to the following business and tax advantages:
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limited liability;
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access to the 50% CGT general discount;
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flow through taxation of income to beneficiaries; and
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flexibility in distributing income.
See Advantages of a trust.
Disadvantages of trusts
All choices of structure are compromises and each type of structure has disadvantages. Those applying to trusts include:
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it can be complex;
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they are more expensive to establish and maintain than some other structures, such as a partnership;
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income must be distributed each year or maximum tax applies; and
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losses remain within the structure and cannot be utilised by beneficiaries. This can be a disadvantage for a start-up business that generates initial losses.
See Disadvantages of a trust.