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Trust stripping is a dangerous game.

Publication date: 23 Mar 06 | Source: CCH TAX WEEK

Issue: Issue 11 2006

Pages: pp. 1-5


Trust stripping arrangements, broadly, involve a situation where trust income is diverted from an intended beneficiary to a tax-exempt entity or entity with losses. Often this 'nominal' beneficiary is a new beneficiary specially introduced for this purpose. The nominal beneficiary pays back the trust income in a tax-free form (eg a loan or capital payment settled in another trust) to the intended or 'real' beneficiary and, thus, the income is effectively distributed tax-free from the trust

The purpose of this article is to examine some of the dangers for taxpayers inherent in the application of s 100A. This article also examines one of the exceptions to s 100A which may appear to help some taxpayers escape the section, however, its application may not be as wide as some taxpayers believe.

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Author profile

Dr Philip Bender ATI
Philip is a barrister at the Victorian Bar practising in federal and state taxation and superannuation. He acts for both taxpayers and revenue authorities and has appeared in a number of leading cases in these fields. Philip is also the author of Bender’s Australian Stamp Duties, a book published by The Tax Institute dealing with stamp duty in all Australian jurisdictions. - Current at 26 June 2019
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