Thread: PTY LTD / trust

would somebody be able to tell me the advantages / disadvantages of being PTY LTD against being a Trust.

I have always worked as a sole trader but as my jobs are getting bigger i think i need to change my business structure.

The best thing to do is to have a trust and have a pty ltd as the beneficiary of the trust.

Benefits - Less Tax & protection

Hi Beeman,

Advice I was given recently was wait until the new taxation review is fully released and what measures the Federal Government are going to take in line with the findings of the review. Labor already moved on several aspects of taxation when they came to office.

My understanding at present is actually the reverse of what Brenny stated : you would form a company and have the trust would be the benefitiary of the company. That way the trust can distribute accordingly and depending on where that money goes, there may be tax advantages due to personal income tax brackets.

Originally Posted by Raptor

Hi Beeman,

Advice I was given recently was wait until the new taxation review is fully released and what measures the Federal Government are going to take in line with the findings of the review. Labor already moved on several aspects of taxation when they came to office.

My understanding at present is actually the reverse of what Brenny stated : you would form a company and have the trust would be the benefitiary of the company. That way the trust can distribute accordingly and depending on where that money goes, there may be tax advantages due to personal income tax brackets.

This is my unserstanding as well, so you would setup the company and have the trustee as the director of the company which can distribute any gains or loses.

also investigate the amount of extra time and cost it will take to administer, some times you do things that save you a few dollars in tax that is only taken by the accountants/auditors. So unless you have the appropriate insurances in place as well you may still be open to losses if something goes astray

1) What industry are you in?

2) Approx T/O?

3) Are you looking to be a sole beneficiary or are there other partners or family members?

Originally Posted by Raptor

Hi Beeman,

Advice I was given recently was wait until the new taxation review is fully released and what measures the Federal Government are going to take in line with the findings of the review. Labor already moved on several aspects of taxation when they came to office.

My understanding at present is actually the reverse of what Brenny stated : you would form a company and have the trust would be the benefitiary of the company. That way the trust can distribute accordingly and depending on where that money goes, there may be tax advantages due to personal income tax brackets.

Apologies. I got it back to front

Originally Posted by Longrass

1) What industry are you in?

2) Approx T/O?

3) Are you looking to be a sole beneficiary or are there other partners or family members?

In regards to changing from a sole trader, how much profit or turnover would business need to have in order for a trust need to be worthwhile (accountants, compliancy costs, tax savings etc)? Would something like $50 - 70k 'profit' be a starting point or would it require more profit to be worthwhile?

E.g. a person with wife, 2 kids under 5. Would it be something like this:

Husband $25,000
Wife $25,00
Child A $6,000
Child B $6,000

This would be around $62,000 profit that would have very little tax payable. Am i right here in my thinking?

Seek independent financial advice would be my recommendation as peoples circumstances are often different. Tax office may view cases and their first line of determination is "are you doing X to avoid paying tax". If answer is yes, then they may crawl all over you, but its a risk assessment to take if you look at doing something creative. Not too many creative avenues anymore (or so I'm told).

Don't forget the company you are trading through will still need to pay company tax prior to distributions.

Originally Posted by bigock

also investigate the amount of extra time and cost it will take to administer, some times you do things that save you a few dollars in tax that is only taken by the accountants/auditors. So unless you have the appropriate insurances in place as well you may still be open to losses if something goes astray

i wouldnt really be doing it for insurance related matters anyway, im already well covered for that type of occurence.

i would be doing it more so for the event that as my jobs get bigger my outlay is obviously getting bigger, as is my manpower requirements. Seeing as my bsuiness is still quite young, it owuld only take one of these companies to decide that paying me is not on there agenda and i would be fucked.

Originally Posted by Belmont

In regards to changing from a sole trader, how much profit or turnover would business need to have in order for a trust need to be worthwhile (accountants, compliancy costs, tax savings etc)? Would something like $50 - 70k 'profit' be a starting point or would it require more profit to be worthwhile?

E.g. a person with wife, 2 kids under 5. Would it be something like this:

Husband $25,000
Wife $25,00
Child A $6,000
Child B $6,000


This would be around $62,000 profit that would have very little tax payable. Am i right here in my thinking?

this is what my accountant was talking to me about doing

Originally Posted by Longrass

1) What industry are you in?

2) Approx T/O?

3) Are you looking to be a sole beneficiary or are there other partners or family members?

Electronic security, locksmithing and some data stuff

not really going to disclose how much im earning on forum

my wife would probably get involved and maybe kids to (only young less than 5)

Originally Posted by Beeman

i would be doing it more so for the event that as my jobs get bigger my outlay is obviously getting bigger, as is my manpower requirements. Seeing as my bsuiness is still quite young, it owuld only take one of these companies to decide that paying me is not on there agenda and i would be fucked.

Well i am not sure regardless of your business structure is going to make some one pay you if they dont want to, or drag out payments.

Perhaps your quoting and contract system is what needed looking at, in the quote spell out that you require pyaments every 14 or 30 day intervals, again in your contract/order have this clause put in, and alwyas claim on time. if payments start to slow down. STOP WORK, until all oustanding monies are paid. You have to be a prick sometimes in business, but if you let them think they can walk over you they will.

I am sure you are like me, and all you want is to be paid for the agreed work for the agreed amount at the agreed times.

Originally Posted by Beeman

this is what my accountant was talking to me about doing

Did he mention how much profit you would need for it to be worthwhile?

Originally Posted by bigock

Well i am not sure regardless of your business structure is going to make some one pay you if they dont want to, or drag out payments.

Perhaps your quoting and contract system is what needed looking at, in the quote spell out that you require pyaments every 14 or 30 day intervals, again in your contract/order have this clause put in, and alwyas claim on time. if payments start to slow down. STOP WORK, until all oustanding monies are paid. You have to be a prick sometimes in business, but if you let them think they can walk over you they will.

I am sure you are like me, and all you want is to be paid for the agreed work for the agreed amount at the agreed times.

i agree with what you saying bigock, but at least i dont loose everything if if a trust / pty ltd where as if im a sole trader im liable for everything.