In a press release issued on 17 October 2006, the Minister for Revenue and Assistant Treasurer, Peter Dutton, announced that the Government will amend the income tax law to allow income beneficiaries of testamentary trusts (such as life tenants) greater access to franking credits on dividends received by the trust (see 2006 TAXVINE No 9(6)(24 March 2006)). It is proposed that beneficiaries who have a vested interest in the dividend of a testamentary trust but not the current beneficial ownership of the underlying shares will be excluded from the franking credit holding period rules applicable from 1 July 2002.
The ATO has advised that it will apply the existing law until the proposed changes are enacted and there will be no compliance action in the interim. However, if a taxpayer lodges a return or activity statement anticipating the effect of the announced changes and later debit amendments or revisions are required because of retrospective legislative changes, no tax shortfall penalties will apply and the GIC may be remitted up to a point provided certain conditions are met.
For a copy of the ATO's administrative arrangements concerning franking credits and income beneficiaries go here
- CGT treatment of testamentary trusts
In a press release issued on 20 March 2006, the Minister for Revenue and Assistant Treasurer, Peter Dutton, announced that the Government will amend the income tax law that applies to certain trusts created under a will (testamentary trusts). The amendments will improve the taxation treatment of income beneficiaries in testamentary trusts, such as life tenants (see 2006 TAXVINE No 40(5)(20 October 2006)). It is anticipated that these changes will apply to the 2005-06 and later income years.
The ATO has advised that prior to the law being amended, it will apply the existing law and does not anticipate any new compliance activity while the legislation is pending.
For a copy of the ATO's administrative arrangements concerning the CGT treatment of testamentary trusts go here