Open a Trust in Australia

It is possible to open a trust in Australia, as this entity is regulated under the local law. The commercial legislation recognizes various ways of operating a business, such as sole traders, partnerships, companies and trusts, therefore, those who plan to set up a company in Australia have many options in this sense.

An Australian trust must be registered following the same registration obligations imposed to other types of structures, such as the ones mentioned earlier. Thus, the entity must be registered with the Business Registration Service, through which the entity will receive its Australian Business Number (ABN) and other mandatory elements that allow its proper functioning as per the requirements of the law.

Our consultants in company formation in Australia can offer full assistance throughout the registration procedure and may also advise on the advantages/usages of a trust, its tax compliance, reporting and many other obligations that may appear when setting up a trust.

What is a trust?

An Australian trust is an entity that is incorporated for the purpose of managing specific assets in the name of a beneficiary. In order to open a trust in Australia, the settlor and the trustee must draw up and sign a trust deed, the document through which the structure gains formal recognition. However, it must be noted that the trust itself is not considered a legal entity.

In general, a trust is registered for investments or business purposes. Upon its establishment, the trust deed will appoint a trustee, who has the responsibility of carrying out the activities of the trust in the name of the beneficiary. According to the Australian law, a trustee can be a natural person or a legal entity.

As mentioned above, the trust has to comply with tax obligations during the financial year, and because of this, it is required to register the structure with the Australian Taxation Office (ATO) during its incorporation, the same institution to which tax reports must be submitted.

The main tax obligations of an Australian trust

For a trust, being registered with ATO implies a variety of tax obligations. Our specialists in company formation in Australia present, in the list below, some of the key elements that must be met, from a tax point of view:

1. it must have an ABN and TFN (Tax File Number);
2. the ABN must be used for all business activities carried out by the trust;
3. it is mandatory to submit to ATO an annual trust tax return;
4. it is required to register for Goods and Services Tax (GST) provided that it is reached the established GST threshold;
5. depending on its particular case, it may also be necessary to submit business activity statements (it applies based on GST and employment obligations).

Taxes charged to trusts in Australia

There are various taxes that must be paid by a trust registered in Australia. This structure can also be entitled to tax exemptions, depending on its characteristics and its purpose of incorporation. Below, we present some of the taxes and tax obligations this structure has and, for more details, we always recommend you to address our specialists:

• if the trust has an annual GST above $75,000 it will be considered a GST payer and must register and pay accordingly;
• the trust may need to pay the trustee beneficiary non-disclosure tax provided that the provisions of Division 6D of the Income Tax Assessment Act 1936 apply;
• trustees are required to submit the Trust Tax Return to ATO, unless exempted (exemptions are prescribed under the Practice Statement Law Administration PS LA 2000/2);
• pay the Pay As You Go (PAYG) withholding tax for the trust’s employees (the payments vary based on the value of the amount withheld – quarterly reports for sums of up $25,000 a year, monthly for sums of $25,000 to $ 1 million, twice a week for sums above $1 million).

We invite you to address us if you need more information on how to open a company in Australia. We can also provide other services, such as assistance in the process of purchasing a shelf company in Australia.