Family Discretionary Trust

[nickinmk]

Over the years I have found this forum to be a priceless source of knowledge. Without it I would have had no idea that I was able to write to the ATO and have them determine the "Undeducted Purchase Price" of my UK Private Pension. As a result I have an percentage each year of my Private Pension payment that is essentially "tax free".

 

Now for my question. I pay tax to the ATO on my UK Private Pension payments that I receive each month. I am 61 years old, and have no other income. My wife has no income, and as a result pays no tax.

Could we set up a "Family Discretionary Trust", and deposit my UK Private Pension into that, and then pay ourselves out of the Trust?  This would then lower the overall amount of tax paid.

Or is this wishful thinking?

Thanks

Nick

[Marisawright]

1 hour ago, nickinmk said:

Could we set up a "Family Discretionary Trust", and deposit my UK Private Pension into that, and then pay ourselves out of the Trust?  This would then lower the overall amount of tax paid.

The question is, would the Pension Fund agree to pay the money directly to the Trust?  I'd have thought they might insist on paying it to you, since you're the named beneficiary of the pension.  If they insist on paying it to you, you'll still be liable to pay the tax regardless of where you deposit the money.

Edited March 21, 2024 by Marisawright

[Loopylu]

The system is weird - if you lose your job in Australia or retire but your partner is still working you are means tested and get no benefits/aged pension. I know a lady who worked all her life and is now 78. She doesn't qualify for an aged pension because her partner is 55 and still working. Conversely, there is no way of sharing your tax burden with a partner who doesn't work and use their tax free allowance. It's a very unfair system. We are in a similar boat to you. My husband can't work due to serious health issues so I have to support him fully on my income but can't use his tax free allowance....

[Ken]

On 21/03/2024 at 14:57, nickinmk said:

Over the years I have found this forum to be a priceless source of knowledge. Without it I would have had no idea that I was able to write to the ATO and have them determine the "Undeducted Purchase Price" of my UK Private Pension. As a result I have an percentage each year of my Private Pension payment that is essentially "tax free".

 

Now for my question. I pay tax to the ATO on my UK Private Pension payments that I receive each month. I am 61 years old, and have no other income. My wife has no income, and as a result pays no tax.

Could we set up a "Family Discretionary Trust", and deposit my UK Private Pension into that, and then pay ourselves out of the Trust?  This would then lower the overall amount of tax paid.

Or is this wishful thinking?

Thanks

Nick

That is just wishful thinking. You would still be viewed as having received the pension and taxed on it before you deposited it in the trust. You can't turn your income into trust income. You could turn an asset into a trust asset and then the income from that asset becomes trust income, but to do that you'd need to convert your entire pension fund into a trust asset which would trigger a host of tax issues in both the UK and Australia.

If you have any spare cash to invest you might want to put it into accounts opened only in your wife's name as the interest/dividends paid will effectively be tax free. 

Edited April 6, 2024 by Ken

[Andrew from Vista Financial]

On 21/03/2024 at 15:27, nickinmk said:

Over the years I have found this forum to be a priceless source of knowledge. Without it I would have had no idea that I was able to write to the ATO and have them determine the "Undeducted Purchase Price" of my UK Private Pension. As a result I have an percentage each year of my Private Pension payment that is essentially "tax free".

 

Now for my question. I pay tax to the ATO on my UK Private Pension payments that I receive each month. I am 61 years old, and have no other income. My wife has no income, and as a result pays no tax.

Could we set up a "Family Discretionary Trust", and deposit my UK Private Pension into that, and then pay ourselves out of the Trust?  This would then lower the overall amount of tax paid.

Or is this wishful thinking?

Thanks

Nick

Have you given consideration perhaps to making tax deductible superannuation contributions?

This may or may not be an option for you depending on your individual circumstances, age, total assessable income and cashflow being some of the defining factors.

Andy