Skip to main content

Your shopping cart is empty

Preamble - Friday 22 October 2010

22 Oct 10 Preamble - Friday 22 October 2010

Further to our previous calls for reform, this week the Taxation Institute joined with the National Institute of Accountants, Taxpayers Australia and the ICAA in a united call for sweeping reforms of the antiquated laws governing the taxation of trusts.  

As members would be aware, last year the ATO introduced a controversial crackdown on unpaid present entitlements.  We believe the Tax Commissioner's technical interpretation of the taxation laws that apply to unpaid present entitlements is not supportable and is at odds with the original policy intent.  

While the practice statement on unpaid present entitlements released by the ATO last week embraced some of the practical recommendations we put forward, the fundamental incorrectness of the ATO interpretation remains. This will increase the cost of a major source of financing typically employed in the SME market.

We have called for an urgent test case to challenge the Tax Commissioner's interpretation of the laws that apply to unpaid present entitlements and at this week's National Tax Liaison Group meeting with the Tax Commissioner, he accepted the proposition that a test case is an appropriate vehicle through which to resolve this issue.

The unpaid present entitlement issue, alongside the Bamford High Court decision earlier this year on the taxation of trust income and distributions, highlights the need for a major review into the taxation of trusts. The Henry tax review, along with recommendations to Government made recently in Treasury's "Red Book" briefing paper, both indicate that the government should re-write the trust laws which are more than 50 years old and are not adequate to deal with the modern use of trusts as trading and investment vehicles.

For further details, please see the media release here.

Please see below for details of other activities this week.

Kind regards
Robert Jeremenko FTIA