I’m in my 20s or 30s and my parents have a family trust - what should I know and why does it matter?
If you're listed as a beneficiary of a family (discretionary) trust, the ATO is now closely monitoring how trust income is used. If income is “distributed” to you on paper but actually used by someone else (e.g. your parents paying family bills), the ATO may see this as a tax avoidance scheme. That can result in the trust being taxed at 47% or hit with penalties. If the trust pays income to a company - such as the family business - there are strict Division 7A rules that treat unpaid amounts as loans or dividends, which can also lead to extra tax. Trustees must document who receives what by 30 June each year, and payments to anyone outside the family group may also be taxed at 47%. The ATO expects clear records, even for past years, so if you're going to inherit or help run the trust, get involved early and seek advice.
By South Australian based Family Business Accredited Advisor
Michael Fox | Wright Evans Partners
Michael Fox is a co-founder and Partner of KMT Partners. With experience across taxation, finance, business strategy and family business, he targets emerging businesses and family enterprises to support renewal, value building and transition to the next generation.
For over 4 decades, Michael has focused on the success of his clients, designing wealth strategies for personal and business growth. Collaborating with owners and family members, he draws on his involvement in Family Business Association and STEP to counsel in navigating confronting situations. In addition, Michael has developed a reputation for mentoring businesses to commercialise new opportunities, imparting advice in their business model, strategy and management to guide their success. He has assembled a suite of business evaluation tool kits to facilitate this, reporting on financial and non-financial performance indicators.
Michael spent 20 years as a tax specialist in mid-tier accounting firms, dealing with clientele across manufacturing, retail, agriculture, wineries and professional services. He has mentored KMT clients and entrepreneurs, through honorary roles with the ECIC (Entrepreneurship, Commercialisation and Innovation Centre), SAYES and Enterprise Workshop. Michael is currently on the global Professional Development Committee of the STEP, Advisory Board Chair and was a founding committee member of the SA Branch, where he retains a role as Deputy Chair of the Australian Special Interest Group, focusing on families. He has previously held national board and state committee (including State Chairman) roles in the Chartered Accountants Australia & New Zealand, and numerous not-for-profits. Michael is involved in Rotary Club of Norwood, enjoying the club’s focus on helping across the city and around the globe.
Areas Of Expertise
- Business strategy and solutions
- Tax advice
- Asset protection structures
- Superannuation and SMSF Remuneration practices
- Family business and succession
- Wealth creation strategies
- Business exit strategies
- Estate planning
- Trust and estate administration
