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Introduction to the taxing of trusts paper


A trustee 'lives' by the trust deed. It governs what the trustee may or must do with the trust property including the acquisition and disposal of trust property and distributions of income and capital to beneficiaries. Some of those choices will have significant tax consequences. Various tax laws determine when an act done by the trustee such as the distribution of income or capital or the sale of a trust asset are taxed and in whose hands. The results will be different according to the type of trust. It is essential the trustee is properly advised on the tax consequences before making decisions about the trust property.

This paper is aimed at lawyers and other professionals who don't specialise in tax but who want or need to be able to identify the tax issues when advising trustees and beneficiaries to help them decide when to seek further advice. It gives a structured and logical introduction to the tax rules for the most commonly encountered trusts in SME accounting and legal practices. It is also very useful for those who simply want a refresher on the basics of the taxing of trusts or who are new to the area.

Topics covered include:

  • how are trusts treated for tax purposes
  • special tax rules for taxing trust income and distributions (trustee, beneficiaries, minor beneficiaries, franking credits)
  • CGT Events for actions concerning trusts
  • taxing special types of trusts
    • deceased estates
    • testamentary trusts
    • child maintenance trusts
    • other excluded trusts
    • foreign trusts
  • family trust elections/trust losses.

This paper was also presented by Steven Rosenstrauss at the 'Tax and Trusts: The Essential Trusts' seminars held in Sydney on 5 April 2006 and on 27 February 2007.

Author profile

Arlene Macdonald CTA-Life
Photo of author, Arlene MACDONALD Until her recent retirement, Arlene was a Barrister at the South Australian Bar for 17 years. Prior to this she spent 8 years at the Australian Government Solicitor's Office, and several years at the ATO and the Commonwealth Ombudsman's office. At the Bar she appeared and advised in a wide range of Commonwealth and State tax disputes concerning income tax, CGT, GST, stamp duty, payroll tax, land tax and other tax issues. Arlene is experienced in acting for the Commissioner of Taxation and for the range of taxpayers who were in dispute with the revenue authorities or who needed advice on how tax law applies in their case. She has a passion for legal education, especially in tax and trust law. She was awarded life membership of The Tax Institute in 2010 particularly for her work over many years in organising, promoting and providing education through The Tax Institute. She has written a vast number of papers and articles and is a highly sought after speaker. - Current at 16 February 2015
Click here to expand/collapse more articles by Arlene MACDONALD.


This was presented at Tax and Trusts: The Essential Basics .

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