How the Family Trust Saved a Family House

The Problem with the GST Payment

I know a guy named Patrick who started a new business – running a Café, and he really wanted to set it up the right way. He saved some money and bought a house for his girlfriend Susan. Patrick and Susan were hoping to get married in a couple of years, and he did not want the business to put the family house at risk. Patrick was really excited about his new Café, so when he took up a lease he set up a business as a family trust. Unfortunately, the landlord increased the rent and a lot of shops nearby started going out from business. This meant that suddenly there became less people going to the nearby shops and stopping in Patrick’s Café for coffee.  He kept paying money to the landlord and suppliers to keep his door open, but he really struggled to pay his GST to the tax office.  Patrick has been lodging his business activity statements on time, but he was not able to meet a number of payment arrangements with the Tax Office, and eventually the Tax Office started legal proceedings against him.

The Solution via the Family Trust

Fortunately, Patrick was running his Café through a family trust with a company trustee, therefore the tax debts were in the name of the family trust and not in his own name. When he came to see me asking for a legal advice, we realized that the family trust would not be able to pay his debt so we put it in to a voluntary administration. The family trust was round up and the Tax Office wasn’t able to get its hands on Patrick’s family house. Patrick is now working as a Chef and his wife Susie has got a six month old daughter Claire.

“While things were tough I was glad that I was able to protect my family,” Patrick said.

Patrick is now thinking about starting up a new restaurant in the next twelve months.

“I am definitely going to make sure that the structure is right.  I’m really lucky that I did that last time!”

Patrick hopes that his next business will be bringing enough money so his wife can work part time to spend more time with their daughter Claire.

Because of the stories like this I see how important it is for people to get the right legal information when they are starting and running their business. This is why I trained my Legal Artificial Intelligence Ailira to give free information on business structuring, as well as to help people quickly and cheaply set up a business structure online. You can chat to  Ailira at www.ailira.com or read all there is to know about how you to structure your business in our Law Library.

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