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  • Trust vesting webinar – questions and answers

    Trust update vesting

    If South Australian trusts have no vesting date, does that mean that trusts setup in South Australia continue on forever?

    The South Australian legislation contains mechanisms for the court to bring the trust to an end.

    South Australia doesn't have the 80 year rule for life of trusts. Are you aware of any moves for other states to adopt this same position?

    We are not aware of any moves by other states to abolish the requirement that trust interests vest within the perpetuity period

    Do you have examples of events that occur prior to vesting and the process to ensure all parties are informed?

    Legal advice should be sought in respect of this issue, as it is not a taxation issue.

    Re: TR 2017/D10, per the article by Matthew Burgess, do you have a view where the trust vests and there are no default beneficiaries?

    It would be an unusual case in which a trust vests and there are no default beneficiaries and such a case would raise broader issues than tax. If you would like advice about the tax issues in the context of a specific arrangement, we suggest that you apply for a private ruling.

    In what circumstances will a variation to a trust deed constitute a vesting/resettlement?

    The consequences of a variation of trust deed are considered in Taxation Determination TD 2012/21

    CGT on the assets, active assets like goodwill?

    It is unclear what this question relates to. TR 2017/D10 considers the CGT consequences for assets when a trust vests

    Can a trust be wound up and a final tax return submitted say in the 2016 financial year if the trust still had a balance in the bank account? Account was closed on 30/6/17 and balance of around $50 taken out

    A trust does not end while the trustee is holding trust property. Whether a trust is required to lodge an income tax return is a separate issue. Whether a tax return is required will depend on the legislative instrument requiring lodgment of returns.

    Trust splitting – how is it different from trust cloning or sub-trusts? Can the split trusts have the same corporate trustee? Can a family trust be split effectively?

    This was discussed in the webinarExternal Link at 11:30. This is also in transcript at the section on trust splitting. We are developing public guidance on trust splitting – and see our advice under development program.

    What is the Commissioner's view as to split trusts and the application of Div 149?

    In this area, it would be appropriate to seek a private ruling on the particular facts.

    Are you seeing the 328-G rollover applied much in practice?

    This is discussed in the webinarExternal Link at 20:50. This is also in the transcript available with the webinar on umbrella trusts.

    Isn't the three year safe harbour rule still subject to general part IVA principles as well?

    See LCG 2016/3 Small Business Restructure Rollover: Genuine Restructure of an ongoing business and related matters. Paragraphs 81 and 82 of the LCG state that Part IVA can still apply in appropriate cases to restructures notwithstanding that the safe harbour rule is satisfied.

    What is proposal for umbrella trust for consultation?

    This is discussed in the webinarExternal Link at 19:30.

    What was the name of the Victorian case in relation to umbrella trusts?

    Commissioner of State Revenue v. Lam & Kym Pty Ltd [2004] VSCA 204; 2004 ATC 5058; (2004) 58 ATR 60

    International CGT aspects

    Does the ATO use the same definition as Foreign Investment Review Board (FIRB) to determine whether a trust is a foreign trust?

    No, we understand that the tests are different.

    If an Aus investment trust (holding listed Aus shares) is vested, in specie, in a non-resident beneficiary, how is the capital gain on the assessed?

    A private ruling may be sought on particular facts.

    Division 6: present entitlement and Lewski

    What are the details of the trustees resolutions that are required?

    This was discussed in the webinarExternal Link at 35:17 and this is in the transcript at Division 6: present entitlement and Lewski.

    See also TD 2012/22 and the Ruling Compendium TD 2012/22EC; and the Decision Impact Statement for Lewski v Commissioner of Taxation.

    What is the Commissioner's position on deeds of confirmation and supporting statutory declarations in the context of lost trust deeds?

    Lost trust deeds raise broader issues than tax. The trustee can seek guidance from the courts. A private ruling on the income tax aspects could also be sought.

    What is the ATO's view on distribution to minors up to the $500/$600 limit?

    We do not have concerns about the appointment of income to minor beneficiaries, provided that the entitlement is genuine – that is, it is intended to be paid to the minor for example on their attaining majority.

    How will that apply in the case of special disability trusts and a trust entitlement contingent on maintaining eligibility to disability pension?

    Section 95AB of the ITAA 1936 assumes that a beneficiary of a special disability trust is presently entitled to all of the income of a trust (even when there is no income). It does not matter for the purpose of that provision whether or not the entitlement of the principal beneficiary is contingent.

    If say you have a resolution that allocates at certain percentages, if there is amendment then can it be in accordance to same percentages and it is a valid resolution as at 30/6/17, or fixed amounts with balance to a particular beneficiary does that work?

    See Taxation Determination TD 2012/22 – examples 3 and 4.

    The issue raised by the Lewski case relates to examples 6 and 7.

    Section 100A

    Interested in hearing some practical examples of when s100A has been applied by the ATO?

    Some examples were discussed in the webinarExternal Link at 49.25. See also the transcript at Section 100A. We are planning to publish a public ruling later this year which will include further examples.

    Will a trust income distribution to a company of which the shares are owned by the same trust trigger s100A?

    Depending on all the facts and circumstances, section 100A can apply to this arrangement.

    When are we likely to see some guidance on our current approach to s100A cases?

    We intend to publish further advice and guidance on section 100A issues this year. Refer to our advice under development program for updates.

    Re 100A – Does this apply to a bucket company that receives a distribution and the funds are retained by the company. Does it make a difference if the shareholders are individuals (who might receive a dividend in the future) or the trustee of the trust?

    We propose to include some examples in the public ruling that we are looking to publish on section 100A.

    Other

    A family trust invested in a unit trust with $1/unit trust value. If the family trust surrenders them < $1, can it recognise it as capital loss? On the unit trust side, how the gain will be treated?

    This is not an issue addressed by the webinar. If you would like advice about a specific arrangement, we suggest that you apply for a private ruling.

    Where can I find more information on family trust election?

    See Family Trusts – Concessions on our website for more information

    Will the ATO consider the views of the Board of Taxation to implement legislative changes to resolve issues regarding bare trusts, likely to be relevant to vested trusts?

    The ATO was involved in the consultation that the Board undertook in preparing its report for government. Ultimately it is a matter for government whether those recommendations are advanced

    For more information on trusts visit trust vesting.

      Last modified: 17 Apr 2018QC 55138