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Can trust be shareholder of Company?

Newbie

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Hi,

 

My question is, Can a trust be a sole shareholder of a company and receive its dividend (after tax) and purchase asset under it? If yes, does the trust have to pay additional taxes on the income (dividend) received? How does this work?

 

Regards,

John

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Champion

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G'day @John_Super

 

A Trust can hold shares in a company.  The trust as a shareholder can receive dividends. I am unsure what you mean by "purchase assets under it".  Generally a trust will only have to pay tax on its undistributed income.  Please see here  for further details.

 

Hope this helps, 

 

TombRadyr

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Champion

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G'day @John_Super

 

A Trust can hold shares in a company.  The trust as a shareholder can receive dividends. I am unsure what you mean by "purchase assets under it".  Generally a trust will only have to pay tax on its undistributed income.  Please see here  for further details.

 

Hope this helps, 

 

TombRadyr

Newbie

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G'day TombRadyr,

 

Thank you for taking your time in replying my query. To clarify further, if a trust receives dividend (after taxed at company rate) from a company, and use that money to buy asset (without distributing it to beneficiaries) should it be liable to pay further tax on it? 

 

John

Champion

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Ola @John_Super

 

Unfortunately your question is not cut and dry.  You should consult the trust deed when looking to define some of the issues I have linked to below. 

 

When a trust receives a dividend franked or unfranked it will form apart of the trusts income . See also the income of the trust estate.

 

Trusts are only liable to pay tax in certain circumstances.  

 

It is not really relevant what is done with funds within the trust.  It is more relevant if there is a beneficiary with a present entitlement  and what the net income of the trust is. 

 

If no beneficiary is presently entitled the trustee will be liable to pay tax on the net income of the trust.  However, the trustee can use the franking credits associated with the franked dividend as a tax offset. 

 

When you refer to the purchase of an asset, is this a depreciating asset, CGT asset or a capital asset  as each will change the impact on the net income of the trust.

 

I have probably created more questions than answers for you here John although I hope the resources i have linked will help.

 

Regards, 

 

TombRadyr