Westcourt

Testamentary trusts

If somebody in your family has had the foresight to establish a testamentary trust in their will, the storey has only just started. The tax management of a testamentary trust requires planning that ensures that the trust operates as intended.   

From an income tax perspective, a testamentary trust offers significant tax advantages. If properly managed, a testamentary trust can distribute profits to a child, and those profits can be taxed at adult tax rates compared to the highest tax rate.     

So, if your testamentary trust generated profits of $45,000 and distributed this profit to two children, the children would not incur tax. However, the same profits to a high-income earner would incur a tax of $21,150.   

However, these tax advantages need careful engagement with the ATO for ongoing tax compliance through tax return preparation. Testamentary trusts can simplify this process by using cloud accounting software like Xero and supporting the Xero file with software add-ons like Hubdoc.   

The tax profile of a testamentary trust can also require consideration of additional items like GST registration for trusts that own and operate commercial properties (among other things). In some instances, testamentary trusts can require other tax registrations like PAYGW, Single Touch Payroll or super guarantee levy. A testamentary trust can potentially be a large and sophisticated investment vehicle.   

The deep tax knowledge at Westcourt, which our tax leadership can demonstrate, allows families to leverage our expertise into tax opportunities. The active engagement of our team with your deceased estate allows opportunities such as events for when children reach maturity, allocating profits to both adults and children and reinvestment within the testamentary trust – all of which have tax consequences.    

A testamentary trust is a simple investment vehicle that a licensed investment advisor assists in most instances. And the collaboration of the investment advisor’s transactions into our software to report to banks and the ATO is important to simplify the administration of testamentary trusts and reduce the ongoing costs and expenses of maintaining these entities.   

Of course, many people retain and operate their testamentary trusts for asset protection reasons. And engaging the Westcourt CFO and bookkeeping services allows families to demonstrate discipline in cash flow management and separates the operation of a testamentary trust away from the personal finances of different family members. Our bookkeeping and processing team are diligent and consistent when processing payments and managing the diverse needs of different family members.    

Engaging Westcourt to manage your testamentary trust from a tax strategy and a bookkeeping perspective is a natural choice for families in business. Our deep, proven tax knowledge allows testamentary trust to maximise the tax opportunities. Our cloud software, including Xero and QBO, simplifies administration. Our global accounting network through GGI Global gives us access to over 29,000 accountants and lawyers worldwide to assist in managing testamentary trusts with assets offshore.  

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