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Australia To Improve Taxation Of Trust Income

Wednesday, March 9, 2011

In December, Bill Shorten, Australia’s Assistant Treasurer, announced that the government would conduct a public consultation process as the first step towards updating the trust income tax provisions in Division 6 of Part III of the Income Tax Assessment Act 1936 and rewriting them into the Income Tax Assessment Act 1997.

As part of this process Shorten also announced that he would seek advice from the Board of Taxation (Board) on whether there were any issues with the operation of the trust income tax provisions that must be addressed in this current tax year.

After examining the advice provided by the Board, a discussion paper has been released that considers ways to implement two interim reforms that will provide taxpayers with increased certainty, and reduce the scope for unfair tax outcomes and the manipulation of tax liabilities through the use of trusts.

While the update and rewrite of the trust income tax provisions in Division 6 will eventually address the current issues with the operation of the trust income tax provisions, the government is aware that there is a need for certainty in the interim. After examining advice provided by the Board of Taxation, it has decided to amend the law to better align the key concept of ‘income of the trust estate’ (which has been interpreted to mean distributable income) with the tax law concept of ‘net income of the trust estate’ (taxable income), so as to reduce anomalous outcomes and opportunities to manipulate tax liabilities; and secondly ensure that capital gains and franked distributions can be streamed to particular beneficiaries.

The paper examines the merits of the different approaches that could be adopted to amend the current tax law to achieve these outcomes, and the government is keen to point out that it is not suggesting that there should be any changes to the trust law.

The government has accepted the Board’s advice that the issues highlighted in this paper must be addressed for this current tax year. This will ensure that the current uncertainties about streaming and opportunities for manipulation are addressed by amendments applying from the 2011 income year.

Interested parties are invited to comment on the paper, and all information contained in submissions will be made available to the public on the Treasury website unless those submitting indicate that they would like all or part of their submission to remain in confidence. The closing date for submissions is Friday, March 18, 2011.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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