Trusts are an extremely popular legal device in Australia. As there is no comprehensive, centralised register for trusts in Australia (in contrast to companies), we cannot know exactly how many are in existence. However, in 2015, it was estimated that there were 850,000 trusts in Australia. Furthermore, the Australian Tax Office (ATO) estimates that by 2022 there will be over 1 million trusts in Australia.
What is a trading trust?
A trading trust is a terrific platform through which to trade and protect the assets of the owners of small and medium sized enterprises. It is a trust relationship that is built on top of a corporate entity. There are protections including that you’re able to change a trustee and there is a separation of ownership and control of the assets.
What are the benefits of a trading trust?
In Australia, there are an estimated 250,000 businesses that are traded through a trading trust. It is a very popular instrument for trading a business. The benefit of a trust is the separation of ownership and control, which is very useful in an insolvency scenario because you can change the trustee. There is also confidentiality and flexibility in taxation.
How do you set up a trading trust?
Business owners that are starting a trading trust should seek advice from their accountant or their lawyer about:
- Stamp duty, depending on the state in which the assets are held.
- Whether to overlay a shareholders agreement to protect the interests of the partners.
- Opening bank accounts.
- Tax file numbers.