Yes, there's a lot of people in a wide range of occupations who have them. As I said in my previous post there is no government or prospective government who will get rid of them.
They're nothing but a tax dodging rort.
"Whatever you do, don't mention the trusts"
But the real power of trusts, the magic, is that they don't actually pay tax. Trust income is only taxed when it is distributed to beneficiaries. "It (use of a trust) does open some of those (tax) opportunities more than a traditional company does," Australian Tax Office deputy commissioner Michael Cranston says in an exclusive interview with Fairfax Media.
Discretionary trusts – the most common form of trust – are especially rich in tax perks. Most family trusts are discretionary.
They allow breadwinners on high tax rates to split their income and distribute it to family members on low or no incomes, and low tax rates – adult kids at university for example.
The distribution of income can be varied each year. So, if a child leaves university and gets a well paid job their share can be transferred to little brother starting university, or a retired grandmother.
So, a discretionary family trust allows a rich miner or manufacturer – with the right tax agent – to minimise or even extinguish their tax bill by promising money to his kids and his parents. The money doesn't even have to change hands, only the tax bill.
Capital gains discounts are also able to be maximised through income splitting/streaming.
All too good to be true? Yes, but it is true, as the Australian Tax Office acknowledges: "At the margins a trust can still stream income to tax preferred beneficiaries...you might avoid tax at the top marginal rate because some or your beneficiaries aren't in that bracket," says deputy tax commissioner Cranston.
And while the data is limited, such tax perks do appear to be enjoyed primarily by the wealthy. The claim is often made that cracking down on trusts would hurt farmers and small businesses most of all. Mr Turnbull reiterated this view on 3AW on Friday.
Yet farming businesses account for fewer than 5 per cent of all trusts. There are more than twice as many in construction for instance
Australian Bureau of Statistics figures for 2014/15 indicate that households in the lowest 80 per cent of earners average less than $20,000 in trust assets. Households in the top 20 per cent average almost $90,000.(These figures take in other private trusts including fixed trusts)
When he launched the last, ultimately doomed, bid at trust reform in 1998, then Howard government treasurer Peter Costello summed it up this way: "Wealthier individuals with access to legal and accounting advice can target particular investments and structures to take advantage of differences in tax treatment. The rest of the community subsidises the wealthy taxpayer."
