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Change from family trust to company

Initiate

Views 310

Replies 6

Hi all,

 

Someone interested in stopping using their family trust & opening a new company to operate their business of $150-200k annual profit. The family trust is not serving them well anymore as its more complicated than they need & they have no other family to distribute to other than themselves husband & wife. (The trustee company cannot trade per the trust deed, so whole new company) They are not all that far off retirement, so planning for that also makes sense as in a company they can reduce work in the future but still maintain an income of franked dividends until the company has run out then its a simple closure. Other than stamp duty on transfer of business assets, what might we have missed making it seem all to easy & too good to be true? It will be more tax effective, simpler administration? They also want to wind up the family trust immediately however I see no rush? They may be better to lodge NIL until vesting date? Is this allowed? Advice appreciated thanks 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 5

Hello @TMarie

 

Changing entity types is not as complicated as it sounds, but trust and company tax returns can sometimes be complex, so you may want to get some advice from a registered tax agent.

 

You should first work out what the company needs to register for. This can include:

 

Once the company is ready to go, you will need to finalise the tax obligations for the trust. This can include:

 

You can find more information online about obligations of a company.

 

Hope this helps.

 

Smiley Happy

6 REPLIES 6

Most helpful response

ATO Community Support

Replies 5

Hello @TMarie

 

Changing entity types is not as complicated as it sounds, but trust and company tax returns can sometimes be complex, so you may want to get some advice from a registered tax agent.

 

You should first work out what the company needs to register for. This can include:

 

Once the company is ready to go, you will need to finalise the tax obligations for the trust. This can include:

 

You can find more information online about obligations of a company.

 

Hope this helps.

 

Smiley Happy

Initiate

Replies 4

Thanks @TonyATO,

Can you tell me if the family trust has to wind up straight away? Or if it can stay open & just lodge NIL returns for a few years? 

ATO Community Support

Replies 3

Hi @TMarie

 

Generally there are legal considerations when closing a trust so you should seek advice about dissolving it.

 

If the trust isn't trading and there are no assets then you can usually indicate a final tax return when the last tax return is done. You would also need to cancel the ABN if its no longer carrying on an enterprise.

 

Let us know if you have further questions.\

 

Ari

 

 

Initiate

Replies 2

Thanks @AriH

 

Suppose they want to leave it open? Can they cancel the tax registrations & ABN without dissolving it? Or does it have to dissolve if it is no longer trading? 

ATO Community Support

Replies 1

Hi @TMarie,

 

The cancellation of the tax registration and ABN is not necessarily done because the Trust has dissolved but rather because the trust is not trading and not required to report.

 

Initiate

Replies 0

Thanks @RenATO