An example of the tax savings possible with a family trust
This example is provided to give an idea of the scale of tax savings which can be achieved through proper use of a family trust. It is important to note however that advice from a trust formation specialist such as Company Solutions Ltd must be sought in order to achieve these savings and ensure your compliance with tax and trust regulations.
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- Joe and Joan Savewell, who have three student children, work in a family business and earn $140,000 which is split $70,000 each. Joe and Joan each pay $18,570 in tax which totals $37,140 for the family.
After taking advice from Company Solutions Ltd they decide to take better protection of their assets and make plans for their estate. They form a family trust with a corporate trustee J and J Savewell Limited, then sell the business to this trust. Incidently their home is sold to a separate trust to separate the business risk from their personal asset.
They receive independent written advice that the market rate for their type of employment is $40,000 each. The trust prepares an employment agreement with Joe and Joan and pays accordingly. The balance of the income made by the family trust, $60,000 ($140,000 less $80,000), is spread evenly between the 3 children at $20,000 each.
The total tax bill is now -
|Joe and Joan
||$8,070 * 2
||$3,900 * 3
|Incidental saving in tax
[Read on to find out more
about the benefits
which are available with a family trust]