Answers to Your Questions About Entities and Structures

Companies

Q: What name can I call my Company?

A: You can call your Company anything you want as long as it is not offensive, a reference to royalty (e.g. Prince Charming Trust) or the name of a company that is already registered.

Q: Who should be the director of the company?

A: It depends on if the structure being used is used for a "risky" purpose or not. i.e. if it is used for a purpose which is NOT risky than the "risk averter" should be the director; if it is used for a RISKY purpose (i.e. business) then the director should be the "risk taker."

Q: Does my company need an ABN (Australian Business Number) and a TFN (Tax File Number)?

A: No, since your company will not make any profit or hold any assets it does not need either, nor does it need to lodge a tax return, but it will need to lodge an annual ASIC return.

Q: Does a "bucket" company need an ABN (Australian Business Number) and a TFN (Tax File Number)?

A: Yes, since your company will be making a profit and holding assets it does need to register for both an ABN and TFN.

Q: Do I need to register my company for GST or PAYG?

A: No. As a sole purpose trust trustee your company will not make any profit, and it will not employ anyone, so it does not need to register for either.

Q: Do I need to register a "bucket" company for GST or PAYG?

A: You may need to register for GST if you are making a distribution of more than $50,000 to the bucket company. However, you will not need to register the bucket company for PAYG because it will not have any employees.

Q: Do I need to open a bank account for the company?

A: No, you do not open a bank account for the company because the company does not and will never hold any assets nor will it conduct business of any kind. It is formed for the sole purpose of being the trustee for the trust.

Q: Do I need to open a bank account for a "bucket" company?

A: Yes you will when you distribute money to it so there is somewhere for the money to go into.

Q: I already have an established company. Can I use this for my company trust structure?

A: No. The company needs to be a "clean skin" company with no trading history. If the company has been trading, then it will not protect your assets properly. This is because of the 6/24 rule. Assets held in the company any time within the past 30 months are still at risk, even if they are rolled into the trust, so technically speaking you could use the company but you will have little or no asset protection for the first 30 months, we do not recommend this approach. On the other hand, if it is a company with no trading history which has been set up and has basically sat there doing nothing ever since, it is possible you could use this as your trustee company.

Q: What type of bank account should I open for the trust?

A: A regular business cheque account. This way you will have a cheque book issued.

Q: The bank says I need to pay them $200 to do a company search before they can open the account. Is this right?

A: No. You don't need to perform a company search unless you are opening a company bank account, and this is a trust account, not a Company account. Try to explain this to your bank. You will need to tell them that the company's sole purpose is to act as the trust TRUSTEE only and the company does not even have a bank account and conducts no business whatsoever.

Q: What do I do with the $10 "Settled Sum" Cheque?

A: All you need to do deposit the cheque into the trust's new bank account as soon as it is opened. It must be the first deposit make into the bank account. Because it is the amount which "settles" the trust it can not be withdrawn from this account and must stay in there at all times.

Q: How do I prove that my $10 Cheque has been used to "Settle" my trust?

A: All you need to do is keep the FIRST bank statement with your trust folder which shows the first deposit as the $10 cheque from the "Settlor" which has been banked into the trust's new bank account as soon as it was opened.

Q: How long do I have to open the bank account?

A: The bank account for the trust must be opened within 28 days of the date in the back of the trust deed. This is the date that they have written in there as the start date of the trust. If you do not open this bank account within the settlement period of 28 days your trust will not be settled and will not provide adequate asset protection.

Q: What happens if the bank account hasn't been opened for some reason and it is longer than 28 days from the date in their deed?

A: Please contact APS for further instruction

Q: Can a trust have an individual trustee?

A: Yes, but if the trust has an individual trustee as opposed to a corporate trustee then it will not protect the assets owned by the individual in any way.

Q: How do I know if I need to register my trust for GST or PAYG?

A: You need to register your trust for GST if it is going to turnover $50,000 or greater in the next financial year. Alternatively if you want to claim back GST from Goods and services paid for by the trust.

You need to register your trust for PAYG (Pay As You Go) if the trust is going to employ anyone and pay them wages/salaries etc.

Q: Can I register for GST or PAYG at a later date?

A: Yes, you just need to lodge the appropriate form with the ATO.

Q: Who should I list as beneficiaries of the trust?

A: Anyone who you would like the trust to be able make a distribution of income to (i.e. anyone you would like to receive money from the trust).

Q: Who can be named as a beneficiary of a trust?

A: The beneficiaries of a trust can be existing individuals or entities which you would like the trust to distribute money to, (such as your husband/wife, children, aunt, a bucket company, another trust) or they can be individuals which you would like to distribute income to in the future, such as: "future children" or "future spouse" etc. (however it is generally not recommended that you bother listing things like this as they can be added later). Alternatively, other organisations can be listed as a beneficiary, such as a church, registered charity or community group.

Q: Can I add beneficiaries at a later date?

A: Yes, you just need to make a note of it in the minutes of trust folder, have the principal sign and date it, stating what date it comes into effect.

Q: Can I add remove beneficiaries at a later date?

A: Yes, you just need to make a note of it in the minutes of trust folder, have the principal sign and date it, stating what date it comes into effect.

Q: Who should be the principle of the trust?

A: Usually the same person who is the director of the trustee company.

Q: One of the beneficiaries names were spelt wrong on the trust deed, what do I do?

A: The principal can just make the correction in pen and initial the correction. This is sufficient.

Q: The principle of the trust had their name spelt wrong on the trust deed. What do I do?

A: You will need to get all the documents reprinted.

Q: Does a trust need an ABN & TFN?

A: Yes it most definitely does.

Q: How do I get an ABN issued for a trust?

A: You can either fill out the appropriate ATO form, or you can apply online at: http://www.abr.gov.au for more information please refer to Chapter 9: 'ABN/TFN Applications'.

Q: Who is the settlor of the trust?

A: The settlor of the trust is someone who our solicitor chooses who is unrelated to the trust. This means they have no financial interest in the formation or running of the trust. They provide the initial settled sum amount; this is usually $10 to $100.

Q: What is the Principal of a trust?

A: "Principal" is most often the term used to describe a person with the power to appoint a new trustee. Normally the reason for naming a Principal is to provide a measure of control over the actions of the trustee. They are also known as the "key person"

Q: Are beneficiaries liable for the debts of the trust?

A: Beneficiaries are NOT held liable for any debts of the trust and CAN NOT be held personally liable in the event that the trust is sued.

Self Managed Superannuation Fund (SMSF) (To Be Setup By a licenced company such as Vital Link NOT Sentinel Asset Protection Specialists as Sentinel Asset Protection is not Licenced to give advice in this matter)

Q: What name can I call a SMSF?

A: You can call your SMSF anything you want as long as it is not offensive or a reference to royalty (e.g. Prince Charming Superannuation Fund). Often people like to use their name for example: Smith Superannuation Fund.

Q: How many people can I have in a SMSF?

A: A SMSF must have a minimum of 2 members and a maximum of 4. The only exception to this is to set up a company as the second member in which case a single person could still set up a SMSF.

Q: Who can legitimately be a member in a SMSF?

A: To be a member of your fund they must be related to you either by blood, marriage or defacto (N.B. You cannot be a member of a SMSF if you have claimed bankruptcy in the last 10 years or if you have ever been found guilty of dishonest conduct).

Q: My Name was spelt wrong on the Super fund documentation. What Should I do?

A: Unfortunately you have to get all the documents reprinted because you cannot have any spelling errors in a super fund.

Q: My relative is on a pension/government benefits, can they be members of my super fund?

A: Yes they can be, but it can severely affect their benefits because any money earned in the fund will be considered income and though they may not receive it up front their payments will be effected, so this is advised against.

Q: I heard that you can get your SMSF to pay for the cost of setting it up. How does this work?

A: You pay for the set-up of your SMSF out of your own pocket, then once your funds have been rolled over into the new SMSF account you reimburse yourself by writing a cheque from the super fund account to yourself as an individual for the cost of formation of the fund. (N.B. You must make a note of the reimbursement in the minutes of the SMSF folder. If you don't do this it may look like you are taking money out of your super prematurely which is a criminal offence.)

Structures

Q: If I am buying a property in a company/trust structure, what name do I put on the contract?

A: The name of the trust, or the name of the company and trustee for the trust, e.g. "XYZ Pty Ltd as trustee for ABC Trust". Please note that the person who will physically sign the contract is the signing director of the trustee company who is the same person as the principal or key person of the trust.

Q: If I am trying to get a loan from the bank what name is the loan taken out under?

A: The trust. (NB. Most banks will not loan money to an entity that has no assets, income or trading history. To get a loan for the trust what you generally need to do is go as guarantor for the loan)

Q: I already have a business name, and I have lots of customers who know me by this name. By running my business through the company/trust structure won't I loose the name and have to make complicated changes?

A: No. You can simply transfer the ownership of the name the trust and have the trust register the trading name that you already have as your business name e.g. "XYZ Pty Ltd as trustee for ABC Trust Trading as Bloggs Buildings Supplies". APS can do this for your client automatically if you select this option when placing an order with APS Order Manager.

Q: Can the trustee Company also be a beneficiary?

A: NO it CAN NOT. Because if any income is distributed to the company it will then have made business transactions and this income becomes unprotected. This defeats the purpose of setting up the structure!

Q: Is the trustee liable for the debts of the trust?

A: A trustee is personally liable for debts that they may incur while acting as trustee. However, unless the trustee is acting improperly or illegally (for example, acting outside the powers provided in the trust deed or has acted criminally) there can be no claim against the assets of the trust. Therefore, a creditor of a trustee cannot claim directly against trust assets. In APS structures there would be no claims made against the trustee anyway because the company owns nothing! This is why a company is used instead of an individual person who would then be liable.

Q: What are the duties of a trustee?

A: A trustee is obliged to observe their duties in relation to the trust property as set out in the trust deed, subject to any general law, and in the light of any statutory variations. Generally speaking a trustee has a duty to:

• preserve trust property;

• insure trust property (though this may vary from state to state);

• properly invest the trust fund;

• act in good faith;

• acquaint itself with the terms of the trust deed and to strictly carry out those terms;

• keep accounts and supply information to beneficiaries when required;

• consider how best to exercise any discretion which they have; and,

• act impartially between beneficiaries

Q: What names are on the contracts when you purchase property in a trust?

A: When the contract is lodged with the land Titles Office only the company name will appear. This is NOT a problem as long as you have written the full name of the company as trustee for the trust on the contract of sale for the property.