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Understanding Trust Deed Provisions

Published on 03 Jun 2014 | Took place at Edwards Marshall, Adelaide, SA

Trusts have long been a central part of Australian commercial enterprise. They are often the “go to” structure for business and investment purposes and are a very effective wealth management tool.

Central to every trust is its trust deed. Every trust deed is different. The importance of the trust deed cannot be understated. It is this document that generally establishes the trust and which sets out the terms on which the trust may be operated and managed. It is this document that defines the beneficiaries, determines when the trust is to come to an end and sets out the conditions under which the trustee is to hold the trust property.

In recent times the ATO has increased its emphasis on the terms of the trust deed. This is apparent in rulings such as Taxation Ruling TR 2010/3 and Draft Taxation Ruling TR 2012/D1 and in Taxation Determination TD 2012/22.

Understanding the terms of your trust has never been so important. What can be done with a trust deed that is outdated and does not meet the needs of the beneficiaries? What are the risks from a trust law, taxation and duty perspective? These are matters of concern to many advisers and their clients. This presentation included:

  • review of some common amendment clauses
  • identifying and addressing issues with beneficiary clauses
  • extending the life of a trust
  • considering the scope of the trustee’s power
  • dealing with the power of appointment and
  • discussing other issues that come up in practice.
  • The session considered the potential Federal tax and State duty risks, associated with various potential amendments and compares the positions taken by State and Federal taxing authorities.

Individual sessions

Understanding trust deed provisions

Author(s):  Leo Efthivoulou,  Jim MCMILLAN

This paper covers:

  • some initial observations about trusts
  • taxation of trusts, the impact of Bamford, CGT and franked dividend amendments
  • reasons for seeking to vary the terms of a trust deed
  • power to vary trust
  • appointment and removal of trustee
  • change of appointor
  • definition of income and streaming of capital gains and franked dividends
  • variations to beneficiary entitlements
  • variation of vesting date
  • Clark, trust resettlements, and CGT
  • stamp duty and variations to a trust deed
  • saving clause?
  • Trustee Act (SA)
  • case studies.
Materials from this session: