Publication date: 04 Jul 03 |
Source: THE TAX INSTITUTE
'Retrospective, ill conceived and a straight jacket on commercial borrowing by trustees best describes the Treasurer's 25 June 'clarification' of the new rules when dealing with unpaid distributions to company beneficiaries' noted Gil Levy, President of the Taxation Institute of Australia.
The measures first announced as operating from 12 December 2002, are still not the subject of any amending legislation and the 'clarification' on 25 June raises as many question as it does answers.
Mr. Levy points out that '...the proposed law will make it OK for a trustee to borrow from a bank to purchase assets but not from a family member on a commercial basis. Principal repayments will be deemed dividends to the family member but not the bank'.
'In turn genuine capital provided to the trust may not be able to be repaid without being deemed a dividend. This will severely hamper many primary production trusts' he continued.
'These measures are ill conceived and are a direct result of the failure of Treasury to consult on a face to face basis with the TIA and other professional bodies. It is to be hoped that the first face to face consultation set for July 11 will help produce some workable and equitable legislation', concluded Mr. Levy.