Due to the complexity of certain business structures, some applicants have trouble determining the correct name to enter when completing the application form – particularly where Trusts are involved, see below.
If the applicant operates a business under a trust arrangement, the name of the trustee (as it appears in the trust deed) should be entered as the legal name on the application form (that is, “ABC Pty Ltd” or “John Smith”) and if the trustee is a company, the ABN of the company should be entered into the main ABN field.
The name of the trust and the trust’s ABN are entered in a different section of the application form.
If the business is operated under a trust structure, the trustee may be an individual, partnership or company, in which case the following will apply:
if the trustee is a company, the ABN of the company should be provided
the ABN of the trust should also be provided (must be in the name of the trustee as trustee for the trust – for example, ABC Pty Ltd as trustee for ABC Family Trust)
the business name (if applicable) must be registered to the trustee
relevant pages of the trust deed must be provided that show who the parties to the trust are, and the signature page
By definition, a trust is a fiduciary obligation imposed on one person (called the trustee) to hold property for a particular purpose or on behalf of other persons (called beneficiaries). Under this relationship, the trustee is required to exercise certain rights and powers for the benefit of the beneficiaries.
The terms of a trust arrangement are set out in a document called the “trust deed”. The trustee is compelled by law to deal with trust property in accordance with the terms of the trust. The operation of trusts is governed by State/Territory legislation.
The main parties to a trust are:
The settlor is the person who establishes the trust by “settling” a sum of money (“the settled sum”) and signing the trust deed. The settlor has no further role.
The appointer is the person who may be named in the trust deed as the one with the power to appoint and remove the trustee.
The trustee is the person who has the legal right and obligation to act on behalf of the beneficiaries in managing the affairs of the trust.
The beneficiaries are the persons for whose benefit the trust arrangement has been set up.
Most prospective sponsors using a trust structure operate as family trusts. In a family trust, the beneficiaries are members of a family (or extended family) and the trustee is usually a limited liability company in which one or more of the beneficiaries hold shares and are directors. The trust deed stipulates how income is to be distributed among beneficiaries.
A unit trust is another trust structure commonly used in business. In a unit trust, property owned by the trust is divided into units that can be bought and sold as investments. The unit owners have an equitable interest in the property (unlike shareholders of a company, who do not have any direct interest in the property owned by the company). Income is distributed on the basis of units held.
A trust is simply a relationship and not a person. Therefore, a trust cannot be approved as a standard business sponsor. An application for the purposes of regulation 2.59 would need to be made by the trustee or trustees, acting on behalf of the trust.
For all practical purposes, if a business is operated under a trust arrangement, the trustee (acting on behalf of the trust) must be the standard business sponsor.
The trustee may be an individual, a partnership or a limited liability company.
Relevant legislation requires the financial affairs of the trust to be separated from those of the trustee. The trustee is required to:
file a separate tax return for the trust (the trustee, when acting in its capacity as trustee for the trust, will have an ABN for this purpose)
maintain a separate set of financial records covering the activities undertaken on behalf of the trust.
If a business is operated under a trust arrangement, the business will be required to present the following documentation:
standard business sponsor application in the name of the trustee as described in the trust deed (for example, “ABC Pty Ltd”) and including details of the name of the trust and the ABN of the trust
certified copy of trust deed (relevant pages including the page containing details of the parties to the trust and the signature page).