New ATO views on the tax treatment of trust income distribution

The ATO has recently published its dramatic interpretation on the tax treatment of trust income distributions.

In particular the ATO is focused on enforcing a new, strict interpretation of anti-avoidance laws for family trust income distributions where cash has not been paid to the beneficiary, and how that unpaid entitlement to income (UPE) is managed. The publications mean significant re-consideration of common trust income distribution practices.

For many decades discretionary trusts have been a popular entity for families to carry on business and own family investments due to the practical asset protection and income flexibility that suit the realities of family life.  The taxation of trust distributions is difficult because the intersection of trust law and tax law has many ambiguities.  Members of the Mazars tax team have contributed through the professional bodies to the long running debate with the ATO on the taxation of trusts, making sure that the perspective of family business is represented.  We will continue to be involved in that the debate, and monitor closely what’s required practically for our clients to manage their trust distributions taking into account these emerging new ATO guidelines.  Stay tuned for further updates.

A succinct summary by the Mazars tax team of the complex issues raised in the recent ATO publications is available here.

If you would like more information on 100A and its potential impacts, please contact your usual Mazars advisor or one of our experts via the form below or on:

Brisbane – Jamie Towers

Melbourne – Robert James

Sydney – Gaibrielle Cleary

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166

Author: Jennifer Ferguson

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Published date: 14/3/22

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