What is an Investment trust?

An investment or trading trust is a trust that carries on a business. If the Trustee of a trading trust is a Corporate Trustee, the director of the trustee company must comply with tax law obligations as well as company law obligations.

Investment Trust’s are commonly used for buying and holding revenue producing assets such as residential and commercial properties as well as shares in listed companies and investment portfolios.

An investment trust can hold shares in a company, therefore allowing dividends to pass to the Trust, which in turn can be distributed to that Trusts Beneficiaries. It will also allow the growth of the Company to be retained within the Trust and not to the former shareholder which presumably was you.

From a tax perspective, Income is either retained as Trustee income or distributed to Beneficiaries and taxed at their marginal tax rates. The benefit of an investment trust is flexibility as to who is distributed earnings in any given year and the ability to add further beneficiaries as required. Capital gains can be distributed tax free and it will also provide excellent asset protection and the flexibility to undertake a wide range of activities without having to substantially alter the structure.

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