There has been various media coverage about the government’s announcement to increase the trustee tax rate (from 33% to 39%; with the change to take effect from 1 April 2024).

Many may have been questioning the decision to own property in a Family Trust.

Firstly, it is important to remember, those who solely own their home in a family trust will be unaffected. If the home (or other asset) is not income-generating, there will continue to be no tax to pay. Secondly, the 39% rate aligns with the top tax rate of individuals.

Our view is that Family Trusts are still useful ownership structures. There are various reasons, but in this brief article:

Reasons include:

1. Creditor protection: Assets held in a Family Trust are protected, unless the assets are settled on the Trust with an intention to defraud creditors.
2. Capital gains & flexibility: gains on assets owned by the Trust would be captured in the Trust (rather than the individual) and there is more flexibility provided by a Family Trust structure.
3. Health and safety legislation: this legislation is strict. The fines are costly. In the unfortunate event of a workplace accident, it is preferrable own the land in a different entity, such as a Family Trust, to ring-fence it from the operator of the workplace (such as a farm, commercial building etc).
4. Protecting Inheritances: Relationship Property laws require inheritances and gifts to be kept separate to avoid becoming relationship property. A Family Trust can be used to keep an inheritance separate.
5. Protecting Property Against Estate Claims: While assets held in your own name can be subject to claims by family members under the Family Protection Act 1955, it is much more difficult for a court to rewrite the terms of a trust.