08 Apr 11 An update on the reform of trusts
It certainly has been a big week for trusts, and there is more to come. Readers will be aware that we lodged our submission to Treasury two weeks ago, and we have continued to engage with the Treasury in this consultative process. The Assistant Treasurer announced on Wednesday that he understood the “overwhelming feedback” that the issue of streaming of capital gains and franked distributions should be resolved in the short term. He also announced that he agreed with the professional bodies that the definitional issues around the concept of “distributable income’ should be addressed as part of the broader review of trusts. The Tax Institute’s view is that this should be satisfactory for the 2011 income year, but we still need to see the detail of the measures before we are completely satisfied that certainty can be achieved. We are also cognisant of the role of the ATO in this reform process. Andrew Mills FTIA (Life) (Greenwoods & Freehills) and Ken Schurgott FTIA (SBN Lawyers) met with the ATO and Treasury at the NTLG Trusts Consultation Sub-group on Tuesday, where the proposed measures were discussed in broad terms. The release of an exposure draft of the legislation is imminent, and The Tax Institute will be working hard to ensure it contains appropriate and practical solutions.
On the Managed Investment Trust (MIT) front, the Assistant Treasurer has announced the deferral of the new measures, with the start date to be 1 July 2012 (rather than 1 July 2011). This move was expected and is welcomed by The Tax Institute. We are aware that many custodians required more time to implement appropriate systems for the new measures, and this deferral should ensure they are ready for the new regime. However, we are disappointed that the Government has not moved to provide immediate certainty about MITs being classified as fixed trusts.