"these people are allowed $18000 tax free "
I am of the understanding that the distributions from a trust form part of the income of the individual, so if a person was to receive $180,000 from a trust and assuming they had no other income, then they would be liable for about $54,000 in tax. The benefit of the trust is to allow income to be split, with a very basic example being:
|
Column 1 |
Column 2 |
Column 3 |
| 1 |
Beneficiaries |
Income |
Tax paid |
| 2 |
TRUST STRUCTURE |
|
|
| 3 |
1 |
$ 180,000 |
$ 54,232 |
| 4 |
2 |
$ 180,000 |
$ 54,232 |
| 5 |
3 |
$ 180,000 |
$ 54,232 |
| 6 |
4 |
$ 180,000 |
$ 54,232 |
| 7 |
|
Total |
$ 216,928 |
| 8 |
|
|
|
| 9 |
INDIVIDUAL |
|
|
| 10 |
1 |
$ 720,000 |
$ 308,032 |
So if I had $720,000 in income (and dont I wish!), then by having 3 other beneficiaries along with myself the income could be split 4 ways with a total tax burden of $217k or so. If i earned all that money myself, I calculate a tax burden of $308k or so, although the ATO website tells me it would be $297k.
So the trust structure does not provide tax free income, but it does allow income to be split. The greatest benefit comes when you can deliver the trust income to people with no other income, and they of course agree to return the net of tax amount to you.
There a lot of complications to this scenario, but to suggest that every beneficiary gets $180k tax free is wrong, and indeed the tax saving in this case is about $80k per year according to the ATO website. Out of that you need to pay accountants etc to maintain the trust records, so it is not without cost.
So then, how many trusts are earning $700k a year plus? I am sure there would be some, and I am sure there would be some earning a LOT more than this, but the majority I believe are there to protect an individuals assets.
If my calculations and understanding is wrong, happy to be corrected.
