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Trusts Decoded


A dictionary definition of a trust is: “A fiduciary relationship in which one person (the trustee) holds the title to property (the trust estate or trust property) for the benefit of another (the beneficiary).”


Why create a trust?
One of the main reasons to create a trust is asset protection. Property and assets can be moved into a trust for protection from creditors, to maintain an estate until a beneficiary becomes old enough to have legal possession, or isolate valuable assets from a trading company that may be more exposed to litigation, for example.


Trusts, if set up in the right way, can help you legally minimize some tax liabilities. But it is a tricky area, and the taxman is always on the lookout to plug perceived loopholes or an over-enthusiastic stretching of the scope for reducing tax.


The word used to name these types of arrangements – ‘trust’ – is appropriate. A trust is a structure that separates control and legal ownership from beneficial ownership; so that at least one person and/or company agrees to hold and manage assets or property in a way that will benefit someone else (beneficiary). A trust therefore is a formal structure for an obligation, where ‘beneficiaries’ place their trust in the controller or holder of assets (called the trustee) to manage those assets for their eventual benefit.


Other parties in a trust structure include a “settlor” who contributes the initial trust asset (which may be anything, including a nominal $10 cash or even a house) to bring the trust into existence, and an “appointor” who generally has rights to appoint, replace and remove trustees.


You could almost liken a trust to a private jet. The jet is put under the control of a pilot (the trustee) to fly the jet while carrying the passengers (beneficiaries) to a destination (when the trust ends, or is “vested”) where the cargo or luggage (assets and property) is unloaded and given to the passengers again. During the flight, the luggage is maintained in the best condition possible and the passengers may occasionally be offered food and drinks if the ticket contract (trust deed) allows it (the beneficiaries may be paid distributions from the trust).


Separate control from beneficial ownership
The structure of a trust allows a business or asset to be put into the hands of a third party (trustee) who is given legal control and has a duty to operate that business or manage these assets to benefit someone else (beneficiaries). This is known as a “fiduciary duty”.


There are various types of trusts. You can have a fixed trust, unit trust and family trust, each with unique characteristics. A deceased estate is also a trust, being property and assets that are held and managed by the executor (the trustee) for those who will inherit them.


Modern trusts are generally governed by written trust deeds that mention how it is set up and the rules for its maintenance, the rights and obligations of all parties, and also how income from the trust’s assets is “distributed”.


Distributions and tax


A trust calculates its annual taxable income under the usual tax laws and then the trustee distributes and/or retains the income. Income that is distributed to beneficiaries will be treated as though the beneficiaries earned it directly and will be taxable at their own marginal rates. On the flip side, the trustee has to pay tax (on behalf of the trust) on any taxable income that is not distributed. Undistributed income is taxed at the top rate (including Medicare levy).


When the trustee decides whether and how much to distribute to each beneficiary, the trustee should take into account each beneficiary’s financial, taxation and personal circumstances and distribute income in the way that best serves everyone. Of course, the trustee is restricted by the terms of the trust deed.


Types of trust


In a fixed trust, the share that beneficiaries have in assets and income (which may be proportional or absolute) are pre-determined and “fixed”, leaving no leeway for the trustee to vary income distribution. Unit trusts are typically fixed trusts as each unit held in the trust represents an entitlement to a certain proportion of the income and/or capital.


A discretionary trust provides the trustee with a “discretion”, as the name implies, over who receives distributions from the trust. The discretion must be exercised in accordance with the terms of the trust deed.


Family trusts


A discretionary trust can generally be a “family trust” for tax purposes if the trustee so elects, but distributions need to be restricted to members of a particular “family group” – only distributions outside this group will attract tax at the highest marginal rate (including Medicare levy).


For further assistance, contact Expert Tax on 0449 952 855 or email us your query at


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Updating your name with the ATO


If you need to lodge tax returns under a new name that is not current on Australian Tax Office (ATO) records, the details will need to be updated before your tax return is lodged. The ATO has issued instructions regarding the steps necessary to change your name for Individuals and Sole Traders.


You cannot change your name via the front page of the tax return, as you have in the past. If you do not follow the procedure mentioned below, processing of your tax return will be delayed by ATO.


You can do this by telephone or online:


The quickest way to update your name is by using the online services for individuals. All you need is a myGov account linked to the ATO.


Alternatively, you can call ATO to get this done quickly over the phone.


Phone 13 28 61 between 8:00 am and 6:00 pm, Monday to Friday, and ask to be transferred to ‘Personal Tax Enquiries’.


Whether you make the change online or by phone, make sure you have your identity documents with you, as listed below. If the ATO are unable to make the changes over the phone, they will provide you with details of other options for updating your name.


Identity documents that can be verified are:


  • Australian birth certificate (full certificate, not an extract)
  • Australian marriage certificate
  • Australian change of name certificate

Note: The ATO will verify the identity document details with the agencies who issue them.


Non-residents can supply certified copies of original supporting documents, as listed below. Documents must not be altered or amended in any way. Documents that you mail to the ATO will not be returned to you – do not mail original documents.


  • overseas passport
  • overseas birth certificate
  • national photo identification card
  • overseas government issued identification
  • a marriage certificate
  • An overseas driver’s licence.

If you are unable to contact the ATO by phone, you can download and complete Change of Details for Individuals Form by clicking here.


It can take up to 28 days to update your records after the ATO receive the form.


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Tax Returns for first timers


At Expert Tax, we understand that completing and lodging your tax return can be confusing.


Do I need to lodge a tax return?


Taxpayers who must submit a tax return include:


  • most resident individuals whose total assessable income exceeds the $18,200 tax-free threshold for the income year
  • a taxpayer who last year paid Pay As You Go Instalment Tax irrespective of income (if they wish to recover the tax)
  • every individual carrying on a business or profession regardless of income or loss
  • a resident taxpayer earning less than $18,200 who has had tax withheld from that income
  • a taxpayer who has been asked to submit a return by the Commissioner.  A full tax return is required even if there is no assessable income to report
  • a resident minor (under 18 on 30 June) who received income from dividends or distributions greater than $416 and franking credits were attached or tax was withheld.


If you do not lodge a return for a particular year, the ATO may send a request to lodge. It is a good idea to notify ATO if you are not required to lodge a tax return. Contact Expert Tax for further assistance.


When are the deadlines and timing?


The lodgment dates are as soon as practicable after 30 June and before 31 October (last day for lodgment) each year.  Extensions may usually be granted if written notice is forwarded to the Commissioner before 31 October.


Tax agents, like Expert Tax, are normally granted extensions beyond 31 October for taxpayers who are listed with the ATO as their clients by that date. Contact Expert Tax on 0449 952 855 for further assistance.


What can I claim?


You can claim deduction for work related expenses such as uniforms, travel expenses, mobile phone, ongoing education related to current employment. You can also claim other deductions such as donations made to charities and fee paid to tax agents such as Expert Tax for lodgment of your tax return.


Evidence Required


If you are claiming more than $300 for work expenses, written evidence must be kept to prove the total claim, not just the amount over $300. Documentary evidence must be kept for 5 years after the later of 31 October in the year the return has been lodged or from the date of lodgment.


The records that you need to keep are receipts, invoices or similar documents, except where a diary is sufficient.


The receipt must show:


  • date of purchase
  • item purchased
  • date the document was prepared
  • name of supplier
  • value of item


Note – This article intends to provide general information for taxpayers. Actual detail and circumstances differ, contact Expert Tax to discuss your situation.


If you are not sure if you can claim a deduction, keep the receipt and we will ensure that we claim all allowable deductions whilst preparing your tax return.


For further assistance, contact Expert Tax on 0449 952 855 or email us your query at


We are open nights, Saturdays & Sundays. We work around your schedule.


You can also send us your query via our website –


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