Bank Account for a Discretionary Family Trust with Good Interest Rates

LEveryLastCent on 30/07/2020 - 09:38
Last edited 30/07/2020 - 12:33

Dear Ozbargain finance experts,

I am seeking some help in finding a bank account for a discretionary family trust with a good interest rate.
Most of the current offers and bonus interest rates accounts are restricted to personal accounts.

Rabo Bank used to be really good and have one good interest rate for every type of account, but now they are no longer competitive for trust accounts.

Short term deposits (max 3 months) would also be good.
Does anybody know of any alternative?

Thank you for any suggestions.

Financial Bank Account Savings Account

Comments

  • netjock on 30/07/2020 - 09:57
    +3

    Bank account and high interest rates don't mix.

  • EveryLastCent on 30/07/2020 - 10:02
    -1

    Agree… Lets say best interest rate then.
    It is always good to have a certain level of cash in an investment portfolio, and it would be good if that cash earned some interest too. Good old days of 6% or 7% in an online savings account…

  • Seraphin7 on 30/07/2020 - 10:39
    +1

    While obviously not a directly comparable investment, would you consider a diversified fixed interest/bond fund investment?

  • screensaver on 30/07/2020 - 10:45
    +1

    heritage Bank had a good rate last time I looked

    • EveryLastCent on 30/07/2020 - 10:51

      A trust would require a business account.
      The business accounts I can see with Heritage Bank have 0.01% interest.
      I was hoping to do better than that…

    • screensaver on 30/07/2020 - 10:52
      +1

      I just checked, it 2.20 for an online saver account, for 4 months, but only up to 100000

      • EveryLastCent on 30/07/2020 - 11:55

        very good, but only for joint or single account holder. No business accounts.

  • EveryLastCent on 30/07/2020 - 10:46

    I never really looked into diversified fixed interest/bond and don't know much about them. I think it is still subject to markets up and downs and also have buy/sell spreads and fees.
    Just looking for an account to park cash between investments. May be longer term now due to increased risk and volatility.

    • Seraphin7 on 30/07/2020 - 10:59
      +1

      As ever, the solution is dependent on requirements. If you're literally looking to hold cash somewhere between investments, and unless you're talking big licks of cash, the amount of interest we're talking about might be quite minimal and inconsequential (you're looking for return from your "investments", not the bank account).

      It would be worth your while investigating these other sorts of investments. Agree, you are subject to some investment volatility (not to the same extent as equity markets) and spreads, but it can be a useful alternative if you're holding cash for more than a few months at a time.

      • EveryLastCent on 30/07/2020 - 11:09

        Thank you. I will look into it. Vanguard may have some ETF for fixed interest/bonds.
        In this times of uncertainty and volatility the equity markets look a bit like a casino. One day is up the next it is down. No two consecutive days in the same direction. Great if you are day trading and catching falling knives (if you are lucky), but worrying if you are investing.
        At my age I prefer to be very conservative.

  • screensaver on 30/07/2020 - 10:58
    +1

    ING 1.25 for 6 months https://www.finder.com.au/ing-direct-business-optimiser-savi…

    • EveryLastCent on 30/07/2020 - 11:03
      +1

      Yes that would be good, but unfortunately I have already used my 6 months welcome rate in the past and now it is down to 0.25% Standard variable rate.
      I am not sure if closing the account and reopening it would qualify again for the welcome rate.
      I know that with Rabo you need to have closed the account 4 years before reopening it to qualify.

  • EveryLastCent on 30/07/2020 - 11:34

    Thank you hellopam2019. Good finds!
    But they are all well below the rates for personal accounts where you can easily get ongoing 1.5% to 1.6%.

  • whooah1979 on 30/07/2020 - 12:01

    No bank is going to give you a high ROI on FIAT deposits. You’ve to be open minded to get a high ROI.

    • EveryLastCent on 30/07/2020 - 12:10

      Yes probably I should have titled it "best interest rates" rather than "high".
      Cripto alternatives are too risky for me.
      It is sort of a difficult time for self funded retirees. You need safe investments because you have to rely on your savings for a long time (hopefully). But safe bank accounts interest rates are not enough to live on, unless you have at least $4M which would give you $64K/year at 1.6%.

  • tio on 30/07/2020 - 12:08

    Trust is a business, so a trust's bank account would have to be a business bank account. Don't think you can find a business transactions account that will also have high interest.

    Best consult an accountant, so see what would be the best way to handle funds going in and out of your trust. There are fee free business bank accounts out there.

  • mskeggs on 30/07/2020 - 19:33

    Is the trustee an individual or a company? It isn't the "trust" part that decides if the account is a personal or business account, but the status of the trustee.

    If an individual trustee, just open a personal account for your trust operations.
    Source: this is what I have with Westpac.

    • tio on 30/07/2020 - 22:53

      Unless you're the sole beneficiary of your family trust, I very much doubt this arrangement would stand up when audited.

      • mskeggs on 30/07/2020 - 23:33

        How would whether a bank supplies you with an account labelled a business account or a personal account have any bearing on an audit?

    • EveryLastCent on 31/07/2020 - 10:30

      If you open a personal account in your name for your trust you will need to provide the bank with your tax file number and all interest will form part of your taxable income.
      An account for a trust is classified by the bank as a business account with you as trustee (John Smith as trustee for The Smith Family Trust). In this case you provide the bank with the trust entity's tax file number or the ABN and all interest earned is part of the trust income to be distributed to the beneficiaries by the trustee.
      The trust may not really carry on a business. It can be just an investment trust.
      I believe it is different if you just open a trust account in your name for your underage child. In this case there is not a legal trust entity involved and you have to give your TFN and the interest will form part of your income regardless.

    • EveryLastCent on 03/08/2020 - 13:25

      Hi mskeggs
      I was re-reading your comment. Just curious if your personal account is for a legal entity trust (ABN) or as trustee for another person (child).
      I checked many of the accounts with bonus offers and they all specify individual or personal account only, in which case you have to give your TFN or they will automatically withhold tax at the highest marginal rate from you interests.

      • mskeggs on 03/08/2020 - 16:56

        I am the trustee for a family (discretionary) trust. The account has the ABN of the trust. It shows up next to my other personal accounts at Westpac. This is also the arrangement for SMSF trust accounts.
        I also happen to be a signatory of a corporate bank account unrelated. It does not show up under my personal accounts, instead under business banking.

        With regard to tax, it is no big deal if they withhold, you’ll get it back at tax time when you file a return.

        I guess my point is, there is no hard and fast rule from the government regarding whether you can access high rate saving accounts - it is up to the individual financial institutions What accounts they allow you to open.

        • EveryLastCent on 04/08/2020 - 10:37

          I agree that the accounts for the trust show up next to the personal accounts in your online banking if they are linked to your customer number, but there are only certain types of accounts that can be opened by a trust. Yes the restriction is imposed by individual financial institutions.
          Even Westpac on their website has "personal accounts" and "business accounts".
          In the Westpac pds "Deposit accounts for personal and self-managed superannuation fund customers" there is a table with "Who is eligible to open one? Please note: all account holders will need to meet eligibility requirements" and it specifies "Personal customers only".
          Yes I agree it is not a government rule, but banks only allow certain type business accounts for trusts. They will not let you open a personal account for a trust. And normally on those business accounts for trusts they do not have bonus interest rates or even ongoing rates anywhere near as good as for personal accounts.
          For example Wespac has personal accounts (Westpac Life or Westpac ESaver) with 1% ongoing interest rates.
          The Westpac business accounts that you can open with a trust (Business Cash Reserve and Business Cash Reserve Bonus) have 0.1% ongoing interest rate.
          With regards to tax witheld because a TFN has not been supplied to the bank, yes you will get it back at tax time, but if the account is in your name the interest earned and the tax withheld will need to go in your personal tax return and be taxed at your marginal rate.
          At least that is my understanding, unless I am missing something.

        • tio on 06/08/2020 - 14:13

          So you're saying Westpac opened a bank account listed in their personal bank accounts section for your family trust? Now that's dodgy.

          • mskeggs on 06/08/2020 - 16:39

            @tio: Why do you think that? The trustee is an individual. Same with my SMSF.
            Is there some superstition you have about bank accounts I've never heard of?
            You said before it won't stand up to audit, and now it is dodgy, but you haven't said why you think that.

            • tio on 06/08/2020 - 20:29

              @mskeggs: Because I've never been able to get a single bank to set up a personal bank account using a business details. Not that I havent asked. I've been told no. Both by my accountant and bankers (Westpac included).

              I have no experience with SMSF, but I'm quite certain that as far as family trusts go, banks only offer business account for them.

  • scotty on 06/05/2021 - 21:43

    Instead of creating a new post I decided to just ask my questions in an existing post of similar nature. Instead of asking the professionals (lawyers and accountants) I have also decided to just ask the OzBargain professionals seeking community wisdom.

    My situation is this — my accountant suggested us to set up a discretionary trust for asset protection (as the likeliness of OzBargain getting me sued > 0%) so we did, with a corporate trustee — and that was over a years ago and I've not done anything since.

    Now I want to get my act together and get at least a bank account (so I can start moving assets & doing some investments). Where do I go from here? As my trustee is a company, can I just go and apply for a business transaction account with "Trustee Company Pty Ltd ATF scotty's Family Trust" from any bank? Currently looking at Suncorp's Business Premium Account as it has no monthly fee & there's a branch close by.

    Thanks!

    • bemybubble on 07/05/2021 - 14:38

      As my trustee is a company, can I just go and apply for a business transaction account with "Trustee Company Pty Ltd ATF scotty's Family Trust" from any bank?

      yep - you're accountant would have given you a bank kit which is effectively your 100 points of ID for the trust. Take it to any bank and you'll be right.

    • Baysew on 07/05/2021 - 16:08

      You might also want to consider Macquarie Bank. Sometimes banks without a branch presence actually need to provide a more streamlined service. (Sooner or later dealing with CBA will result in being sent to a branch.)

      Recent post on setting up SMSF bank account. Recommendation for a Bank Account and Broker for My SMSF

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