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10 Oct 08 Speeding up private ruling applications on trust cloning

At 3 September 2008 meeting of the National Tax Liaison Group (NTLG) (see 2008 TAXVINE No 34 (5) (29 August 2008) and 2008 TAXVINE No 35 (1) (5 September 2008)), Members expressed concern about delays in dealing with requests for and processing of ruling applications on whether the CGT exceptions in paragraph 104-55(5)(b) or 104-60(5)(b) of the Income Tax Assessment Act 1997 apply to a transfer of assets from one trust to another (commonly referred to as the trust cloning exception) and the large administrative commitment by the Tax Office to the process. The Professional Bodies sought to explore with the Tax Office possible avenues to streamline this process either through additional Tax Office guidance material or through administrative solutions under the Commissioner of Taxation’s general administrative power. The Tax Counsel Network has provided the following response in respect of speeding up the processing of private ruling applications:

“The relevant trust deeds must be carefully analysed. Due to the complexity of the legal questions involved and the high risk of error, the staff required to process such ruling applications must have specialist expertise in trust law. This is a time consuming process as many of the trust deeds the Commissioner has been asked to consider in the context of the trust cloning exception have been lengthy and complex.

One way practitioners could assist the Commissioner to expedite the processing of ruling applications would be for practitioners to consider confining their applications to specific questions concerning the sameness of particular terms or particular beneficiaries. In this context it would assist if practitioners were able to analyse why, having regard to the deed, they consider it arguable that the effect of particular terms or the identity of particular beneficiaries is the same. In this way the Tax Office would be able to rule on whether the particular terms or the identity of particular beneficiaries are the same for the purpose of the trust cloning exception; or whether there are differences in relation to the particular terms or beneficiaries which would result in a failure to satisfy the trust cloning exception.”

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