Friday, July 1, 2011
The Tax Institute of Australia has welcomed the Australian Tax Office’s (ATO) announcement of special administrative arrangements for the application of new distribution streaming measures for the nation’s 600,000 trusts.
The ATO guidance means that trustees and their advisers have been afforded additional time to consider how the new law affects them and to put appropriate records in place. It heads off a situation in which trustees and advisers may have had to create records by June 30 without having a full understanding of the measures contained in Tax Laws Amendment (2011 Measures No. 5) Bill, which passed the Senate last week and now awaits Royal Assent.
“The ATO guidance follows consultation by the ATO with the Tax Institute and other professional associations,” said Institute Senior Tax Counsel, Robert Jeremenko. “It is good to see the ATO taking on board the profession’s concerns and adopting a practical approach.”
Trustees have been given a two-month extension to August 31 to make records to satisfy the “specifically entitled” requirement for franked distributions.
Whilst the ATO will not be selecting cases for audit solely to determine whether trustees have complied with the law, they will be investigating cases where there has been a deliberate attempt to exploit weaknesses or deficiencies in the new provisions.
“The message is abundantly clear – trustees must play by the rules and conform to the intent of the policy,” Jeremenko said.
He also said that the new law makes it clear that trusts are entitled to stream capital gains and franked distributions – a situation which was put into doubt by a High Court decision last year.