UPDATE 72MARCH 2015

THE a–z of trusts

Anna Ziaras

This is the March 2015 update of the A–Z of Trusts Recent Developments section. In this update, author Anna Ziaras has provided new commentary on legislative announcements and case law developments, as well as the latest on ATO rulings, interpretative decisions and practice statements.

Highlights

  • Commentary on the following topics has been updated for new developments:

—trustee resolutions and distributions, including sample distribution minutes (refer to [8-1300]–[8-1315]);

—sham transactions involving trusts, and also on the GST issues facing trusts (refer to [8-2700]–[8-2720] and [14-1240]–[14-1280]);

—trust losses (refer to [9-1000]–[9-2600]);

—court applications to vary trust deeds (refer to [3-1500] to [3-1580]);

—pension and social security entitlements (refer to [4-2500]–[4-2520]);

—closely held trusts (refer to [8-5160]);

—the thin capitalisation rules (refer to [16-1535]).

  • Sample income clauses, streaming and matching clauses and trustee indemnity clauses have been added. Refer to [1-3020], [8-1260] and [1-1660].
  • Material on the general anti-avoidance rules (Pt IVA) has been updated to take into account the 2013 amendments to Pt IVA. Refer to [8-2500]–[8-2580].

Legislative Announcements and Developments

  • The status of the proposed trust income tax rewrite proposed new tax regime for managed investment trusts is discussed. Refer to [RD-1] and [RD-2].
  • Amendments to the CGT provisions of the ITAA 1997 were introduced that ensure there are no CGT consequences when an individual receives certain compensation payments or damages indirectly through a trust. Refer to [RD-3].
  • Amendments to the ITAA 1997 that improve the ability of businesses to restructure and ensure that foreign pension funds have access to the MIT withholding tax regime have commenced. Refer to [RD-4] and [RD-5].
  • Treasury released exposure draft legislation to provide look-through income tax treatment for certain instalment warrants and instalment receipts. [Refer to RD-6].
  • The Taxation Administration Regulations 1976 have been amended to allow tax information to be shared between the ATO and other government agencies. Refer to [RD-16].

Case Law Development

  • The New South Wales Court of Appeal held that it was not open to the Court to give the trustee a comprehensive power to alter the terms of the trust deed in Re Dion Investments Pty Ltd. [Refer to RD-9].
  • The Commissioner of Taxation has applied for special leave to appeal to the High Court from the decision in FCT v Australian Building Systems Pty Ltd (in liq). Refer to [RD-10].
  • In Wellington Capital Ltd v ASIC, the High Court held that the responsible entity of a managed investment scheme was not authorised to make an in specie distribution of scheme property to unit holders. Refer to [RD-11].
  • In Re Trustee for the Confidential Trust and FCT, the AAT considered the operation of Div 6AA of the ITAA 1936, which taxes the unearned income of persons aged under 18 at penalty rates. Refer to [RD-12].
  • The Full Federal Court dismissed the taxpayer’s appeal in Taras Nominees Pty Ltd v FCT, from a decision that the taxpayer was liable for CGT when land held in trust was transferred to a joint venture trust. Refer to [RD-13].
  • Re Track and FCT looks at the application of the general anti-avoidance rules to a scheme carried out by various trustees and beneficiaries. Refer to [RD-14].
  • In Rawlings v Commissioner of State Revenue, the Queensland Civil and Administrative Tribunal found that a trust agreement between the trustees and beneficiaries of a testamentary discretionary trust should not be aggregated. Refer to [RD-17].

ATO Administrative Practice

  • The Federal Government provided its response to a Parliamentary Joint Committee report on family business in October 2014, and released the Board of Taxation’s report on the tax impediments facing small business. Refer to [RD-7] and [RD-8].
  • The Commissioner of Taxation has stated that the ATO is taking “a fresh look” at its compliance approaches. Refer to [RD-15].

A–Z of Trusts1