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Trusts are a fairly common structure that you can use to operate a business, own assets, and distribute income. In a trust arrangement, the person or company who operates as the ‘trustee’ is under a legal obligation to control the trust’s assets for the benefit of others, the ‘beneficiaries’. Although trusts can serve similar purposes as companies, they are different structures, and the law regulates them differently. This article explains whether trusts require an Australian company number (ACN), an Australian business number (ABN) and a tax file number (TFN).
What is a Trust?
A trading trust is a business structure that involves a trustee who owns the business assets and enters into contracts on behalf of the trust. The trustee is an entity that can either be an individual or a company.
You should note that a trust is not a separate legal entity. The trustee is responsible for the operation of the trust and is legally liable for the debts of the trust. Commonly, however, the trustee is a company, which can reduce the liability of the business owners.
For example, say you operate your business through a trading trust, and Company A is the trustee of the Trust. When purchasing assets, Company A, as trustee of the Trust, will purchase assets your business will use to operate and own them on behalf of the trust.
Does a Trust Require an Australian Company Number (ACN)?
An ACN is a unique nine-digit number that identifies an Australian company, much like a licence plate identifies a car. Companies should use their ACNs alongside their company name in any legal documents in order to identify the company clearly.
Unlike an ABN and TFN, you do not have to register an ACN for your company. Instead, an ACN is automatically assigned to your company when it is incorporated with the Australian Securities & Investments Commission (ASIC).
Trusts are an entirely different type of business structure to a company. As a result, they cannot have an ACN. However, an ACN may still be relevant to a trust if it has a corporate trustee. A corporate trustee is where you incorporate a company to act as the trustee of your trust instead of an individual person.
Example
Imagine that an individual named Philip Burke inherits a large sum of money from his grandmother. Philip plans to use the money to buy a number of investment properties. Therefore, his accountant advises him to set up a discretionary trust to purchase the properties to distribute the rental income to different family members. His accountant also recommends having a corporate trustee.
Philip’s accountant incorporates Burke Investments Pty Ltd with ASIC. ASIC automatically assigns the company an ACN of 123 456 789. Philip’s lawyer then sets up The Burke Family Trust for him and appoints Burke Investments Pty Ltd as the trustee.
When signing the contracts to purchase the properties, the purchaser is identified as follows: ‘Burke Investments Pty Ltd (ACN 123 456 789) ATF The Burke Family Trust’.
Therefore, while Philip’s trust does not have an ACN, the trustee is a company. This means that Burke Investments Pty Ltd has an ACN as a corporate trustee.
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Does a Trust have an Australian Business Number (ABN)?
Your trust only needs an ABN if you use it to operate a business. This requirement applies in the same way that a company only requires an ABN for the same purpose.
Example
Andrea Ellis operates a jewellery business in Terrigal called Central Coast Carats as a sole trader, with a registered ABN of 98 765 432 101 that she uses when invoicing clients. Separate from her jewellery business, Andrea decides to start a new lawn mowing business called Terrigal Lawns, which, after consulting her accountant, she plans to operate through a trust. Andrea gets her lawyers to set up a trust called The Ellis Family Trust and appoints herself as trustee for the trust.
Because the trust will be operating a business, it will require an ABN. The ABN must be registered against the trust and not the trustee entity. Andrea will register the trust for an ABN and is given the ABN 12 345 678 910.
Additionally, whenever Andrea signs any legal documents for the lawn mowing business, the business will be identified as follows: ‘Andrea Ellis ATF The Ellis Family Trust t/as Terrigal Lawns (ABN 12 345 678 910)’.
Whenever Andrea signs any legal documents for her jewellery business, the business will be identified as follows: ‘Andrea Ellis t/as Central Coast Carats (ABN 98 765 432 101).
Does a Trust have a Tax File Number (TFN)?
A trust should have its own TFN, as it will need one to lodge annual tax returns. Upon registering for an ABN, a TFN will automatically be issued. If an individual is a trustee of a trust, they do not use their own personal TFN as trustee. Instead, they use a separate TFN that was registered to the trust. If the trustee changes to another person in the future, that person will continue to use the same TFN for the trust. It is vital to understand that the ABN must be registered to the trust and not the trustee entity.
If you have a corporate trustee for a trust, the same process applies. The trust still uses the same TFN despite the trustee being a company. Again, if the trustee changes to another company in the future, that new company will continue using the same TFN for the trust.
Example
Imagine that an individual named Sarah Wilde is employed as a nurse. Additionally, Sarah receives pay slips from her employer that cite her own personal TFN. Together with her husband, James, Sarah decides to set up a family trust with which to own their share portfolio and distribute dividend income between them and their three children. Sarah is appointed as trustee of the trust.
Sarah registers a new TFN for The Wilde Family Trust and cites this TFN when lodging income tax returns for the trust.
Ten years later, Sarah and James decide to appoint one of their children, Thomas, to replace Sarah as trustee for the trust. Thomas continues to use the same TFN that Sarah registered for the trust when lodging income tax returns for the trust.
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Key Takeaways
Trusts can be used to run a business, own assets, and distribute income. A trust does not have an ACN. However, if the trust has a corporate trustee, the corporate trustee will have its own ACN. A trust only needs an ABN if it is conducting business. If it does, then the trust registers an ABN. A trust should have its own TFN, which is automatically issued upon registration of an ABN.
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Frequently Asked Questions
Trusts cannot have an ACN as they are not a company. However, an ACN may still be relevant if a trust has a corporate trustee.
A trust has an ABN if you use it to operate a business. But, rather than the trust itself having the ABN, the ABN is actually attached to the trustee of the trust in their capacity as trustee.
A trust should have its own TFN. This requirement is like an ABN for a trust. Specifically, it means that the TFN is registered by the trustee of the trust in their capacity as trustee.
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