Family trusts complement SMSFs more than ever

The strategy to use family trusts in conjunction with SMSFs is potentially going to gain significance for retirees in the wake of the new super reforms, a specialist lawyer has predicted.

“Post-1 July perhaps the ideal strategy for those moving into retirement is to have both a self-managed super fund as well as a discretionary family trust. For example, having a self-managed fund to provide you with tax-free income up to your transfer balance cap and also for excess monies perhaps having a family trust to hold those monies,” Townsends Business and Corporate Lawyers superannuation and estate planning special counsel Brian Hor told attendees at the Super Central Bacon, Super and Eggs seminar in Sydney yesterday.

Hor pointed out a family trust can be regarded as more than just a vehicle to house money that cannot be contributed to super and should also be considered as a tax-effective structure.

To that end, he said in certain situations a family trust can mean the effective tax rate paid by the individuals involved can end up being lower than the 15 per cent charged on the earnings of an SMSF in accumulation phase.

He also highlighted a family trust can give unitholders more freedom to implement certain wealth-building strategies restricted under the retirement savings laws, further complementing their use with an SMSF.

“[Family trusts do not restrict] how many beneficiaries you can have, who, when and what you want to distribute to people from time to time, there are no conditions of release unless we write them into the trust deed, of course, no restrictions on investing the assets of the trust and so forth,” he noted.

“[There are also] no borrowing restrictions and, of course, no restrictions regarding any transactions with related parties.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital