A recent alert to trustees from the Australian Taxation Office
(ATO) states that trustees who make beneficiaries entitled to trust
income by way of resolution must do so by the end of an income year
(June 30) for that to be effective for determining who is to be
assessed on the trust's income.
The ATO position is that if a trustee makes a resolution after
the end of an income year, there is a risk that the resolution will
be ineffective and the trustee will be assessed on that income at
the top marginal tax rate under section 99A.
The ATO position ignores recent case law in relation to this
issue. Provided your client's trust deed does not require the
trustee to distribute income by 30 June, it is still arguable that
distributions of income that clients do not want to stream to
specific beneficiaries can still be made within a reasonable time
after 30 June (BRK (Bris) Pty Ltd v
Commissioner of Taxation  FCA 164 at paragraph 34).
A recent Treasury consultation paper, 'Modernising the
taxation of trust income – options for reform', also
acknowledges that there is no trust law requirement for
distributions to be made by 30 June each year.
Therefore, even if the 30 June deadline is missed, clients whose
deeds do not require that income distributions must be made by 30
June should at least have an arguable position in asserting that a
post-30 June distribution of income is effective.
However, if seeking to stream dividends or capital gains to
specific beneficiaries, trustees will need to comply with the
special provisions introduced with the 'streaming measures'
towards the end of last year. These provisions stipulate that
seeking to stream franked dividends to specific beneficiaries
must be made by 30 June; and
that stream capital gains to specific beneficiaries must be
recorded in the accounts or records of the trust no later than two
months after the end of the income year (i.e.by 31 August).
Resolutions made after these dates will be ineffective for
streaming purposes – resulting in capital gains and
franked dividends being allocated proportionately among
beneficiaries who receive other income (or the trustee, if there is
no other distributable income).
Winner - EOWA Employer of Choice for Women Citation 2009, 2010
Winner - Australasian Law Awards Gold Employer of Choice 2011
Finalist - ALB Australasian Law Awards 2008, 2010 and 2011 (Best
Winner - BRW Client Choice Awards 2009 and 2010 - Best Australian
Law Firm (revenue less than $50m)
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).