Being an entrepreneur, investor, or even a family man, the protection of assets, property, and even money, is one of the main concerns. In addition to this, when you own some capital, it is more than understandable that you want to have those resources generating profits, instead of being stored and exposed to taxes, lawsuits, bankruptcy, etc.

We have already talked about the excellent conditions and opportunities that Australia offers for investment. Thanks to its great economic openness, different types of companies and businesses you can start, and its broad tax policy, establishing your capital in the sixth largest country in the world is a great idea. 

In this article, we will introduce you to 2 investment mechanisms that are quite common in Australia, but at the same time can make a difference in protecting your assets and help you save not only hundreds but perhaps thousands of dollars in taxes. We are talking about Trusts & Funds.

We will analyze each mechanism with its advantages, types, and opportunities to provide you with the best information and avoid any confusion. As always, our experts will be at your service if you wish to invest in any of these mechanisms available in Australia.

Trusts in Australia

According to the Australian Taxes Office (ATO), the trusts are recognized as a legal relationship between privates where an asset (cash, stocks, shares, etc) is held by a trustee for the benefit of the asset’s owner. This relationship is not a legal entity but still is subject to taxation for tax administration.

There are two main actors in the relationship established by the Trust: The trustee, and the beneficiary.

-Trustee: Is the legal person or company responsible for the assets within the trust and that has to make sure that the relationship is being managed according to the deed.

-Beneficiary: It’s the person, persons, or entities that benefit from the trust. In other words, they are those who receive the assets contained within the trust.

Some benefits come with trusts, and we are going to tell you which are they:

-It protects your personal and business assets.

-They are considered a wealthy-creation vehicle.

-Trusts help you minimize your tax obligations.

-Trusts have low compliance costs

-Flexibility over capital and income distribution

-Protect money and other resources at the same time they are producing profits.

Trusts are very important instruments for the protection of assets, which can be used not only by investors and businessmen but also by families seeking to maintain a secure future. We have already talked about Australia's openness to foreigners, so if you are starting a new life here, this information is of interest to you.

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There are different types of trusts in this country, which are:

a) Discretionary Trusts: 

This is the most common form of trust used in Australia. According to its description, the trustee has full discretion as to how the incomes are distributed to the beneficiaries. It’s mostly used by families.

The main reason to use this type of trust is for asset protection and tax planning. Despite the trustee can decide not to distribute the income to certain members of the family, but it comes with certain tax increases.

b) Fixed Trusts:

Unlike the discretionary trust, with this type, the trustee doesn’t have discretionary power over the income distribution. At the beginning of this trust, fixed rates are established for each beneficiary, so that each beneficiary has a specific percentage of the trust's income.

To clarify the idea, in fixed trusts, the beneficiaries’ interests are set according to their “holding units”, just like shares are issued to shareholders of a company.

c) Hybrid Trusts:

As its name suggests, this type of trust has characteristics of both fixed and discretionary trusts. It combines the benefits from both types of trusts with fixed-income rates and the trustee’s discretion.

This type counts with unitholders and discretionary beneficiaries. The trustee has the power to distribute the incomes among beneficiaries, but also they are distributed according to the number of units that each one of the beneficiaries holds. This type has great income and capital gain tax advantages.

d) Testamentary Trusts:

As its name suggests, it only starts to act after the testator has passed away. In a few words, the testator’s assets don’t go directly to its beneficiaries, but to trust on behalf of themselves.

In general, the terms of this trust are set by the testator’s will, and it’s generally aimed to secure the beneficiaries’ well-being.

e) Special Disability Trusts:

This type is set to provide help and assistance to immediate relatives in order of taking care of a family member who has a disability. Before the trust can be set up, the beneficiary must be assessed as severely disabled, according to law.

The assets of this trust can be used to pay for several expenses, including medical and accommodation needs.

Establishing trust is a great idea to protect assets and family members, as well as secure the future. Our experts can help you learn which type best suits your needs, as well as which one will provide the most benefits. Contact us

Funds in Australia

Once we have talked about the types of trusts and their benefits, it is time to cover the figure of the funds that you can access in Australia. There are several types of funds you can invest in this country. 

After you invest in a managed fund, its manager will buy and sell assets like shares or bonds looking for profits for you. When you invest in funds in Australia, you own units of the fund, which value will vary according to the assets.

In Australia, there are several types of managed funds you can invest in and generate profits, which is why we’d like to tell you some of these advantages:

-Great amounts of money are not required

-There are several global investment opportunities

-You will have a regular income while your money works

-While investing your money with experts, your investment will have a better performance.

We will now tell you which are the main managed funds in which you can invest in Australia:

a) Cash Funds:

These are low-risk and short-time investments. The main destinations for these investments are money market deposits, short-term government bonds, and bank bills.

b) Fixed Interest or Bond Funds:

This type includes low and high-risk investments. The main actor in this type is the corporate bonds, which can generate several incomes and returns within different periods. Australia has a great fixed interest fund chart, due to a profitable and stable environment, which generates confidence among the investors.

c) Mortgage Funds:

Invests in property loans (mortgages). Some funds are high risk. The fund's risk depends on the quality of the borrowers and the purpose of the loan. You receive income as long as the borrower pays interest. Your investment doesn't increase in value. It can fall in value if borrowers can't repay their loans. You should pay attention to that.

d) Property Funds: 

As its name says, the investments in this type of funds go to residential property, commercial property, or property developments. Some property funds are high risk. You might not be able to withdraw your money from the fund at short notice, but the profits to gain are very attractive. 

e) Share Funds:

With this type of fund, you will be able to invest in listed companies in Australia, overseas, or both. There are a lot of business and a deep chart of investment opportunities for this fund. It offers the potential for higher returns but also has higher risk.

In general, funds and trusts in Australia provide great support to entrepreneurs, investors, businessmen, and families in the preservation and growth of their capital and resources. Being successful in business is not just about generating large returns or income, but also about knowing how to protect and grow them further.

At Mundo, we want your assets to be protected, so our large team of experts is ready to work side by side with you to determine the best mechanism for you, your business, and your family. Don't waste any time and contact us.

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Financial boutique Corporate, Financial Licenses, Investments, Residency

Years of practice in his field: 25