Trust Distributions under ATO attack 24th February 2022


The ATO has recently released new rules in relation to their interpretation of what is ordinary family or commercial dealing so that it is not caught under section 100A as being a reimbursement agreement. We have mentioned previously in our newsletters that if there are distributions to family members that the cash should follow the distribution and now this has been clarified by the ATO.

We will write further articles in due course once we have reviewed the rulings and communicate directly with you but from our reading of the rulings it is still possible to distribute to corporate beneficiaries and other family members but the cash must follow. Loans can be made to the trust by beneficiaries, but the loan cannot be interest-free.

The ATO is also concerned where income from a trust is distributed to children over 18 but the parents retain the economic benefits of the trust income. The ATO is concerned where there are contrived schemes of children paying for expenses that might ordinarily be paid by their parents and the child receives the distribution to reduce the tax liability for the family group.

We will keep you updated on these rules.

Important: Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

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MB BS FRACP, Consultant Physician in Nuclear Medicine, Concord and Nepean Hospitals, Clinical Lecturer, Discipline of Imaging, University of Sydney