FAQ

Yes. The structure we establish for you can be active throughout Australia.

The laws in each State or territory will impact upon how you actually use the structure. These laws may relate to Land Tax, Stamp Duty, the purchase of a property or the conduct of a business.

You should consider advice on the specific activity you intend to undertake in the structure. Contact our associated professionals, Pacific Law, to obtain that advice.

The piggybank trust is a discretionary trust. The type of trust is similar to discretionary trusts used for investment or business purposes. However, the use of the piggybank trust is different.

The piggybank trust is kept risk-free. This provides a safe house for holding assets. The assets to be kept safe include shares in the companies that act as trustee.

There is not a legal requirement for structures to open a bank account. If the structure is receiving income, for example, then it should open a bank account to receive that money.

The structure is a separate legal entity. Because of this, it should have its own bank account. You should not use your own bank account to receive the structure’s income or pay the structure’s expenses. Doing so weakens the protection that these structures offer.

Your bank’s requirements may vary, for example some banks will require an ABN to open an account and some will not. Usually, your bank will ask for:

• A copy of the Trust Deed;
• The constitution of the trustee Company;
• A copy of the company’s registration certificate; and

The ABN for the Trust.

Bank accounts should be opened in the name of the structure. For example, “ABC Pty Ltd as trustee for the XYZ Trust”.

The piggybank trust will require a bank account if it is receiving funds and paying funds out. Sometimes, the piggybank trust does nothing but hold the shares in the trustee companies. In that case, a bank account will be unnecessary.

The appointor is the person with the longer term control of the Trust. It is the appointor who can appoint and remove the trustee from time to time. The presumption is that the appointor can remove the trustee, appoint themselves as trustee and take control of the trust.

The successive appointor should be selected carefully.

The role of appointor will pass to the successive appointor if the first-named appointor dies or becomes incapable.

You can appoint a successive appointor:

• in the trust deed itself; or
• in your Will or by a separate Deed.

If you do not make an appointment and you die, the role passes to your legal personal representative (your Attorney under an Enduring Power of Attorney or the Executor name in your Will).

The way that ASIC records the member of a company can cause confusion. ASIC will not note the name of a trust when the shares are held in the Trust. ASIC’s records will only note that the shares are held by the trustee and that the shares are not ‘beneficially’ held.

If the shares are held beneficially, there is no trust involved.

If the shares are not held beneficially, they are held for a trust.

Stamp Duty is incurred by signing the Trust Deed (in States where it is incurred at all).

It is the act of signing that is the dutiable event.

Duties are assessed State by State within Australia.

For the States with Stamp Duty, the issue is whether a party signed in that State.

It is a common misconception that the first person to sign is the only party that incurs Duty, which is not true.

Any signature by a party to the Deed (Settlor or Trustee or Appointor) in the relevant State will trigger Stamp Duty.

Clients often ask about avoiding the State Duty by leaving the State to sign the Deed.

This technically works.

If a NSW-based client travels to Queensland to sign the Deed, they will not incur Stamp Duty.

However, banks based in the Duty States will often ask for a Stamped copy of the Trust Deed.

We can tell the bank that the Trust Deed does not require stamping, but they may insist upon Stamping.

What the bank wants, the bank gets.

Often they will refuse to provide finance for a deal unless the Trust Deed is stamped.

This results in a rush to stamp the Trust Deed the day of settlement of a purchase or just a few days before.

Clients need to be warned that, while Duty may not be technically incurred, the bank may require it with little notice.

Ultimately, the decision on whether to cross the border to avoid Duty is up to the client.

A Trust can own more than one property. The question is whether or not it should.

All asset held by a Trust are subject to the risks of that Trust. This means that if a Trust owns more than one property and a problem arises with one property, the other properties are exposed to the risk.

This might be a liability connected to the property which is not covered by insurance. All of the properties will be vulnerable to any claim.

It might be that the value of one property drops substantially. This means that other properties will be available to the bank, for example, to satisfy their debt. To be clear, this will happen even if there are different banks used for each property. There may not be cross-securitisation, but the liability to repay the debt, and the availability of the other properties, remains the same.

You must decide what value of assets, or how many properties, you are prepared to expose to one set of risks.

A Company can act as trustee for more than one Trust.

Generally, we recommend that you have a separate trustee for each Trust. However, it is a matter for you to assess. The reasons we recommend separate Trusts are below, you may find that none of them apply to you.

Firstly, in Queensland, separate Trustees are a land tax advantage. Trusts in Queensland have access to a land tax threshold. Each Trust has access to a separate threshold. This is conditional upon each Trust having a separate Trustee. This means that in Queensland, land tax can be saved by having separate Trustees for each Trust. This does not apply in other States.

Secondly, having one Company as trustee for multiple Trusts can lead to confusion. It can make administration more complicated. For example, you may receive invoices just in the name of the trustee company. This obliges you to ensure that you can properly assign the invoices to the correct Trust. If there is a separate Trustee for each Trust, that confusion will not arise. If you are good with record keeping, this may not be a problem for you.

Thirdly, having one Company as trustee for multiple Trusts can lead to cross securitisation. This occurs when a bank tries to capture as security the assets of all trusts which the Trustee controls. Sometimes bank documents are received late in the purchasing process. This can make it difficult to renegotiate the terms of the documents.

The registered office of a company is the service address listed for all correspondence to be issued by ASIC. Having your home address as the registered office of a corporate trustee, does not impact the asset protection of the structure as the company is non-trading. Generally, the registered office will be either your home address or your Accountants office. Most Accountants an ASIC service which assists with the yearly compliance of your Company.

This is generally determined by your intention with the property purchased. If you buy a property with the intention to earn passive income by renting it out, you will most likely be seen as a property investor. If your intention is to buy a property and develop it to sell, and in turn make a chunk of profit, this will most likely be regarded that you are in the business of real estate. Creating new residential is considered the same also. Depending on whether you are regarded as being an investor or in the business of real estate, this can change the way that profits made are taxed.

If you are carrying on a business, or are considered as being in the business of real estate and your annual turnover is more than $75,000, you will need to register for GST. If you are already registered for GST personally, your trust will still require a separate GST registration as the trust is a completely separate entity for tax purposes.

This will depend on which state you are purchasing property in. As each state differs, be sure to check the rates and thresholds with your accountant so that you can anticipate the expected liability of land tax, relevant to your investment

A Bucket Company is a Proprietary Limited Company, which acts as a corporate beneficiary of your trusts. The purpose of this is to be able to distribute profits to this company to cap the tax payable at approximately 30%. The Bucket Company does not trade, it purely receives distributions. There are certain conditions surrounding drawing money out of this entity once the tax has been paid, so be sure to consult your Accountant before establishing this type of structure, to ensure you fully understand the aspects of utilising such funds.

In the event that you establish a Piggy Bank Trust, a Corporate Trustee and an Investment Trust, generally the Investment Trust is the only entity required to file an annual tax return. In some cases, the Piggy Bank Trust will too, but this depends on whether the Trust is engaging in any activities other than being the shareholder of your Corporate Trustees.

When lending money personally to your trust, it is a good idea to have a loan agreement drawn up by your Solicitor to document this transaction. By having the loan agreement in place, it places a level of protection of the funds that the trust owes you. The loan agreement is also a beneficial way of recording the interest rate you are on charging to the trust, if the money you lend is borrowed in the first place.