A new financial year is here once more, but many practitioners will be focussing on the significant changes that became law in the last days of the 2011 year.
The trust streaming Bill became law on 29 June and the Tax Office made an important announcement with regard to its practice with the new law. The Tax Office announcement concerns the administrative treatment that they will be adopting for trustees that intend to stream franked distributions to certain beneficiaries for the 2011 income year (in accordance with the new rules contained in the Tax Laws Amendment (2011 Measures No. 5) Act.)
The Tax Office says that trustees with a usual 30 June balance date will be given until 31 August 2011 to make records to satisfy the "specifically entitled" requirement for franked distributions in section 207-58 of the new Act. This is a similar practice to that outlined in IT 328 and 329 for present entitlements. The Tax Office will not be selecting cases for review or audit in respect of the 2011 income year for the sole purpose of determining whether the purported streaming of capital gains or franked distributions by a trustee is effective. However, they will be taking compliance action in cases where there has been a deliberate attempt to exploit weaknesses or deficiencies in the law.
The Tax Institute consulted with the Tax Office as they developed their administrative practice and we are pleased that they have heeded our concerns. Please see our press release issued on 29 June. Their announcement represents a practical approach for trustees and their advisers.
The new streaming measures are complex, and The Tax Institute has developed a number of products to help you come to grips with the new environment. For example, the new edition of Discretionary Trust Distributions 2011, which covers the new measures, is available in print and online. Please see the website for more information. The Tax Institute will continue to consult with the Tax Office about the administration of the law, and with Treasury about broader reforms for the taxation of trusts. If you would like to share your thoughts about the new measures or trust reform generally, please leave your comments on our blog or email us at Tax Policy.
Robert Jeremenko FTIA