Earlier this month, the Commissioner of Taxation confirmed that
trust distributions for the FY12 income year need to be made on or
before 30 June 2012. This announcement follows a number of legal
developments related to the distribution of trust income.
Here, special counsel Justin Byrne outlines these developments
and explains how trust distributions can be made even when the
amount of income has not yet been determined.
Following two key changes to the process surrounding trust
distributions, the Commissioner has announced he will be requesting
further information from selected taxpayers after 30 June.
Even if your trust's income has not yet been determined,
you can still make distributions by the deadline of 30 June using
one of a number of different methods.
Changes in trust distribution assessment
The Commissioner's practice of allowing two months after 30
June in which to make resolutions has been withdrawn. In addition,
there have been changes to the legislation requiring specific
entitlements to be "recorded in its character in the
accounts" of the trust.
The Commissioner has also announced that, as part of his
compliance program, he will request copies of the trust
distribution minutes, together with a copy of the trust deed, from
selected taxpayers within the first few weeks following 30 June.
Accordingly, taxpayers should be ready to provide this information
Making trust distributions when income is unknown
There are a number of ways in which distributions can be made at
or before the 30 June deadline, even if the exact amount of trust
income has not yet been determined.
One way is to use percentages - for example, "Mr X is
entitled to that amount which equates to 50 percent of the trust
income, and Mrs X is entitled to that amount which equates to the
balance 50 percent of trust income."
Another way is to use fixed amounts, with one or more
beneficiaries being entitled to the balance of the income - for
example, "Mr X is entitled to $100, Mrs X $200 and the balance
to ABC Pty Ltd."
Neither of these methods will be as accurate as a resolution
where the exact amount of trust income is known, but they should
provide a fairly close approximation and will satisfy the
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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