The High Court decision in Bamford clarified a number of issues
in relation to how income can be defined in a trust deed and
whether provisions giving the trustee a discretion to adopt
different concept of income are effective.
Many trust deeds will need to be amended to ensure clients can
take advantage of the principles clarified by Bamford.
The Commissioner has also issued a Decision Impact Statement
(DIS) and Practice Statement (PS LA 2010/1) in which he has
accepted the basic principles outlined in Bamford but has
highlighted a number of "unresolved" issues.
Any review of trust deeds should also consider these
Cooper Grace Ward is offering a service where we will review
(and amend as necessary) client trust deeds for a fixed fee of $550
(inclusive of GST).
In our trust review process we consider a wide range of issues
including the following:
We will ensure the trust deed has a definition of trust income
that allows the inclusion of capital gains and also ensure the
trustee has the discretion to adopt a different concept of income
to provide maximum flexibility.
Our income definition excludes "notional amounts"
such as franking credits as it is not possible for a beneficiary to
be presently entitled to these notional amounts. This is an issue
highlighted by the Commissioner in the DIS.
We insert provisions to give the trustee a discretion to apply
outgoings against income or capital and make distributions out of
gross income (which may allow distributions out of gross income to
preserve franking credits etc).
We will remove any requirements that the trustee must resolve
to distribute income or determine what concept of income applies by
30 June in any year. The Commissioner has indicated that, where the
deed stipulates that income distributions must be made by 30 June,
he will insist on strict compliance.
We also review the trustee powers and update these where
required - to reflect current requirements of financiers.
When reviewing the deeds we also consider whether there is a
risk that any amendments might trigger a resettlement of the
Cooper Grace Ward was named Best Australian Law Firm in the BRW
Client Choice Awards 2010 - Revenue < $50m. Joint Best
Australian Law Firm in the BRW Client Choice Awards 2009 - Revenue
The firm has also been named as the fastest growing law firm in
Australia for 2009 by The Australian.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The article discusses the legislative requirements and then provides some comments on common mistakes made by caveators.
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