Establishment Documents | No | Partnership Agreement | Constitution/Shareholders agreement | Trust Deed/Unit holders agreement | Trust Deed | Trust Deed | |
Governing Law | No specific Act | Partnership Act (State) | Corporations Act | Trustee Act (State) | Trustee Act (State) | SIS Act (Rigerous Rules) | |
Regulatory Body | N/A | N/A | ASIC | N/A | N/A | ATO | |
Seperate Legal Entity | No | No | Yes | Yes | Yes | Yes | |
Perpetual Existance | Terminates on Death | Terminates - change in partner | Yes | Must vest within a period | Must vest within a period | Yes/depends | |
Persons/Suitability | Self | Family/3rd Parties | 3rd Parties | Family/3rd Parties | Family | Family | |
Limited Liability | No | No -joint & several liability | Yes | Can be - if trustee a Co | Can be - if trustee a Co | Can be - if trustee a Co | |
Level of Complexity | Simple | Medium to High | Complex | Complex | Complex | Very Complex | |
Cost to establish | Low | Low/Medium | Medium | Low/High depending on parties | Low/High depending on parties | High | |
Cost to operate | Low | Medium | Medium/High | Medium/High | Medium/High | High | |
Asset Protection | None | None (Also Liable for debts of other partners, even if had no knowledge of debt, and was not responsible for it) | High | High | High | High | |
Tax Rate | Individual Marginal Tax Rate | Partners Tax Rate | 30% or 27.5% for SBE | 47% Or beneficiaries tax rate | 47% Or beneficiaries tax rate | 15% | |
Top Tax Rate (2019) | 47% | 47% | 30% or 27.5% | 47% | 47% | 15% | |
Flexibility in Distribution | None | None | None | None | High - Trustee Decides | High - Trustee Decides | |
Distribution of Losses | Individual uses | Partners can use | Trapped in Co | Trapped in Trust | Trapped in Trust | Reduces Beneficiary Account | |
Carry Forward of Losses | N/A | N/A | Contintuinuity of ownership and same business test applies | Compliance with Trust Loss rules | Compliance with Trust Loss rules | N/A | |
Transfer of Losses | No | Generally No, unless within a tax consolidated group | Yes, if within a tax consolidated group | Generally No, unless within a tax consolidated group | Generally No, unless within a tax consolidated group | No | |
Non Commercial Loss Rules | Yes | Yes | No | No | No | No | |
Income Splitting | No | Some flexibility with the use of partner salries (refer TR2005/7) | Dividends, but Note PSI rules and IT 2503 | Distributions, but Note PSI rules and IT 2504 | Yes, Distribution determined by trustee, but Note PSI rules and IT 2505 | Yes, Determined by Trustee | |
Streaming of income | No | No | No | Yes franked dividends and capital Gain | Yes franked dividends and capital Gain | No | |
Loans to Principals | N/A | Yes | Division 7A applies | Yes/Div 7A if UPE to Corporate Trustee | Yes/Div 7A if UPE to Corporate Trustee | No, Beware breaches | |
Interest Deduction on Return of Capital | N/A | Yes - TR 95/25 | Yes - TR 95/25 | Yes - TR 2005/12 | Yes - TR 2005/12 | No | |
Payment of tax free capivtal gains | N/A | N/A | May be a Dividend - refer S44/S47(1A) & S104-135 | CGT Event E4 may apply S104-70 | No CGT Event E4 - TD 2003/28 | N/A | |
Change in majority underlying ownership (Subdivision 149-B) - Pre CGT assets takes on MV at 149 date | N/A | N/A | Can Apply | Can Apply | Should not apply unless a new family is added refer IT 2340 | N/A | |
CGT Event K6 (S104-230) PreCGT Shares/Units | N/A | N/A | Can Apply | Can Apply | No | No | |
S100A ITAA 1936 Reimbursement agreements- income is assessed to Trustee | N/A | N/A | N/A | Can Apply | Can Apply | N/A | |
Excessive Payment to Principle or relative | S26-35 ITAA 1997 | S26-35 ITAA 1997 and S65 ITAA 1936 | S109 ITAA 1936 | N/A | N/A | N/A | |
CGT General Discount - Asset help >12 months | 50% | 50% | No | 50% | 50% | 33.30% | |
Availability of Small Business CGT Concessions | Yes | Yes | Yes | Yes | Yes | No | |
Significant Individual Test | N/A | N/A (but Yes if trust and company partners) | Applies | Applies | Applies | N/A | |
Can principal be employed | No | No | Yes | Yes | Yes | No | |
Salary Packaging | No | No | Yes | Yes | Yes | No | |
Who registers for GST | Individual | Partnership | Company | Trustee for Trust | Trustee for Trust | Trustee for Trust | |
Tax Assessed | Individual | Partners | Company | Beneficiary or Trustee | Beneficiary or Trustee | SMSF | |
Borrowing to pay tax - interest deductible | Yes - ID2006/269 | No - TD 2000/24 | Yes | Yes, if incurred by trustee & has sufficient nexus with the business | Yes, if incurred by trustee & has sufficient nexus with the business | No | |
Do Principles have a fixed interest | Yes | Depends on P'ship terms | Yes | Yes | No | No | |
Access to Farm Management Deposits (FDA) | Yes | Yes | No | Individual Beneficiary of Trust Income | Individual Beneficiary of Trust Income | No | |
Primary Producers Income Averaging | Yes | Yes | No | Individual Beneficiary of Trust Income | Individual Beneficiary of Trust Income | No | |
R & D Tax Concessions | No | No | Yes | No | No | No | |
Franking Credit benefits | Yes | Yes | No (Adds to FC Account) | Individual Beneficiary of Trust Income (fixed entitlement) - if no fixed entitlement, a FTE is needed | Individual Beneficiary of Trust Income (Note 45 Day rule and FTE - Family Trust Election needed) | Yes | |
Negative Gearing | Yes | Yes | No (loss trapped) | No (loss trapped) | No (loss trapped) | Yes but limited benefit | |
Capital Gain Streaming | No | No | No | Fixed | Yes | No | |
Business Use | Can do - but risk attached | Can do - but risk attached | Yes | Yes | Yes - but do not include passive investments in trust | Generally No - High Risk of Breach | |
Investment | Can do - but risk attached | Can do - but risk attached | Yes - but no CGT exemptions | Yes - but beware CGT event E4 | Yes - Safest | Yes - Safest - but may be restricted in investment choice | |
Trade Creditor Recourse | Full personal | Full Partner | Against Company - No claim against shareholders | Against Trustee and then assets of trust (via trustees right of indemnity) | Against Trustee and then assets of trust (via trustees right of indemnity) - No claim against beneficiaries | Against Trustee and then assets of trust (via trustees right of indemnity) | |
Access to Underlying assets by associated parties | Yes | Yes | Yes | Yes | Yes | No - locked in untill met condition of release | |