07 Mar 1111 Assistant Treasurer's announces trust changes in an address to The Tax Institute's 26th National Convention
On 4 March 2011, the Assistant Treasurer, Bill Shorten, gave an address to The Tax Institute's 26th National Convention held in Brisbane, Queensland.
In his address, Mr Shorten announced that the Government will adopt two recommendations of the Board of Taxation in relation to trusts. He said:
"Today, I am pleased to announce that the Gillard Government will adopt two recommendations of the Board of Taxation to simplify the tax law for over 600,000 trusts. These address two key areas of uncertainty for trusts following the High Court's Bamford decision.
First, the amended law will clarify the definition of the income of a trust estate. This will address situations where the tax burden falls on a beneficiary despite not receiving the economic benefit.
Second, the law will be amended to enable streaming of capital gains and franked distributions to beneficiaries. Before the Bamford case, trusts commonly streamed income to particular beneficiaries and the Government wants to ensure that this flexibility can continue.
These changes will apply for 2010-11 and later income years with a discussion paper released today.
There are no easy answers and these are interim steps to ensure greater confidence and certainty in trusts. They will not solve all the issues highlighted by the Bamford caseand the Gillard Government remains committed to updating and rewriting trust laws more broadly. The expertise of the Tax Institute will be crucial in this reform process.
I do want to emphasise that the government has taken swift action on trusts where others haven't. We don't believe trusts are any form of tax avoidance. We see trusts as a legitimate feature of how Australians conduct their financial affairs. And there will be more to come in this space."
Submissions are requested by close of business Friday, 18 March 2011.
Mr Shorten said that a a further round of public consultation on exposure draft legislation and associated explanatory materials will be released as soon as possible. It is expected that legislation will be introduced into the winter sittings of Parliament.