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The ATO has withdrawn a previous ruling that permitted the streaming of income from family trusts, allowing trustees to optimise payments according to individuals’ tax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.
Recommended for you
AMP has agreed in principle to settle an advice and insurance class action that commenced in 2020 related to historic commission payment activity.
Financial advisers will have to pay around $10.4 million of the impending $47.3 million CSLR special levy but Treasury has expanded the remit to also include super fund trustees and other retail-facing sub-sectors.
While social media can have positive financial influence, the overwhelming risks signal a greater need for affordable advice as Australians continue to seek financial education on social media.
Fitzpatricks Advice Partners has released a guide on building a national advice firm with the argument that these firms are crucial to facilitating growth in the struggling profession.
