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Australia To Improve Taxation Of Trust Income

Thursday, April 14, 2011

The Australian Assistant Treasurer Bill Shorten has released for public consultation exposure draft legislation that will increase certainty for trustees and beneficiaries of approximately 660,000 trusts in Australia.

On December 16, 2010, the government announced that it would introduce amendments, before June 30, 2011, so that beneficiaries could continue to use the primary production averaging and farm management deposits provisions in a loss year. Shorten said that he expected the news to be very welcome to the 23,000 Australian farmers who have trusts.

Last month the government released a discussion paper that canvassed options to implement the recommendations made by the Board of Taxation to better align the concept of 'income of the trust estate' with 'net income of the trust estate' and enable the streaming of capital gains and franked distributions. The government received a substantial amount of feedback from interested stakeholders following the release of this paper, but Shorten said that the government had taken those concerns on board.

As announced in the Assistant Treasurer's address to the Institute of Chartered Accountants 2011 National Tax Conference on April 6, the government will defer consideration of the proposal to better align the concept of 'income of the trust estate' with 'net income of the trust estate' to the broader update and rewrite of Division 6 of Part III of the Income Tax Assessment Act 1936 (Division 6).

"However, the government is aware that if there is no change to address the alignment problem, potential opportunities for tax manipulation would exist until the rewrite becomes law," said the Assistant Treasurer.

In order to address these opportunities, the government will introduce specific anti‑avoidance rules to target the use of "low-tax entities," especially exempt entities, to reduce the tax payable on the taxable income of a trust. These rules are required to address the potential opportunities for tax manipulation that would otherwise exist until the rewrite becomes law, and will apply for the 2010-11 and later income years. They will be reviewed as part of the broader update and rewrite of Division 6.

The exposure draft legislation introducing the streaming of franked distributions and capital gains as well as the targeted specific anti‑avoidance rules is substantially, but not fully complete, Shorten said.

"I have decided to release this legislation early to ensure that interested stakeholders have the maximum opportunity to comment on the core changes proposed in this legislation," Shorten explained. The explanatory materials accompanying this exposure draft legislation will be released shortly.

"Trust tax law has been an ongoing issue for some time. These changes will provide more certainty to the many thousands of small businesses and farmers who use trusts. I encourage all interested stakeholders to make a submission," the Assistant Treasurer said.

Submissions close by April 29, 2011, to allow the introduction of the measures in the winter sittings of Parliament.

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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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