Monday, November 28, 2011
Australia's Assistant Treasurer Bill Shorten has recently announced that a new consultation paper concerning the modernization of trust taxation will give trustees and beneficiaries of over 660,000 trusts the opportunity to have a better say in their own financial future.
"The interaction of the trust law and tax laws has been an ongoing issue for some time, and it is time to resolve it,” Shorten said.
The paper explores barriers to the effective operation of the trust income tax provisions in the Income Tax Assessment Act 1936, as well as broader tax issues.
The options described in the paper draw heavily on the expertise of the private sector, through the Tax Design Advisory Panel and the Board of Taxation.
Shorten said that unlike the opposition coalition's preferred policy on trusts, the government is not looking at taxing trusts as companies, "which would be a major departure from the current law".
Nevertheless, Shorten described the consultation exercise as: “The most comprehensive review of the trust income tax provisions for years”.
"It builds on the amendments to clarify that capital gains and franked distributions can continue to be streamed through trusts," he explained.
According to Shorten, the government is “aware that the current restrictive definition of 'fixed trust' is an issue for trusts other than MITs (managed investment trusts) and considers that a review of different options for a more workable approach is warranted”.
Next year, the Treasury is set to release a separate discussion paper on the appropriateness of the current definition of 'fixed trust' for public consultation. This will allow the government to consider the problems with the current definition and announce its response around the middle of the year.