Uncertainty ahead of family trust ruling: Nexia Court
Members and trustees of family trusts should check their trust deeds, or risk running the gauntlet ahead of a potential Australian Taxation Office (ATO) ruling that may outlaw streaming of income within family trusts, according to chartered accountancy firm Nexia Court and Co.
The ATO has withdrawn a previous ruling that permitted the streaming of income from family trusts, allowing trustees to optimise payments according to individuals’ tax circumstances, according to Nexia Court and Co. practice partner Sean Urquhart.
The ATO could at any time release a practice statement formally banning the streaming, and until the ATO formalises its decision trustees are in a state of limbo, potentially up until distributions are done at the end of the 2010-11 financial year, Urquhart said.
“Anyone with a family trust should be aware of the ATO’s expected changes, as they are going to make a big difference to the way trusts are allowed to manage the streaming of income,” he said.
“One of the benefits of a family trust is the ability to obtain the best possible tax advantage in an effective and legitimate way. It’s almost certain that the ATO will rule out streaming — such as franking credits — in family trusts when it releases the ruling. This ruling could be handed down at any time,” he said.
The ATO withdrew the previous ruling following the Bamford case, where a High Court ruling essentially allowed income within a family trust to be defined by the trust deed, so that the terms of the trust deed ought to prevail when determining how the beneficiaries should be assessed to tax.
Anyone with concerns over the operation of their family trust should speak with their accountant, Urquhart said.
AUTHOR
Chris Kennedy
Recommended for you
With Fortnum Private Wealth and Professional Financial Services now unified under the Entireti umbrella company, CEO Neil Younger has detailed to Money Management the firm’s new direction and future expansion.
The FAAA has suggested looking offshore for overseas financial advisers to ease the adviser shortage, but are employers willing to take on the burden of workplace visas?
There may be a huge influx of alternatives coming to the market, but timing and access difficulties mean advisers can easily end up disappointed with their selection, according to Morningstar global CIO Dan Kemp.
An NSW individual has pleaded guilty to one criminal charge of providing unlicensed financial services after promoting crypto investments at national seminars.
