We've finalised our public advice and guidance products for trustees and their advisers on trust reimbursement agreements where section 100A may apply:
- Taxation Ruling TR 2022/4 Income tax: section 100A reimbursement agreements
- Practical Compliance Guideline PCG 2022/2 Section 100A reimbursement agreements – ATO compliance approach.
Section 100A is an anti-avoidance rule that can apply where a beneficiary’s trust entitlement arose from a reimbursement agreement. Broadly, a reimbursement agreement involves an arrangement under which a beneficiary is made presently entitled to trust income and:
- someone other than that beneficiary receives a benefit in connection with the arrangement
- at least one of the parties enters into the agreement for a purpose of reducing tax.
There is no reimbursement agreement in any of the following circumstances:
- an arrangement simply involves a beneficiary receiving and using their trust entitlement
- the agreement has been entered into in the course of ordinary family or commercial dealing
- the presently entitled beneficiary is under 18 years of age or otherwise under a legal disability.
In finalising our guidance, we carefully considered the various submissions received through consultation with tax professionals and the community. We aim to provide certainty about how we will administer the taxation laws in relation to trust distribution agreements.
We have not retrospectively changed our views on how the law operates. This includes taxpayers who entered into agreements between 1 July 2014 and 30 June 2022 and relied on our previous guidance.
If you or your clients are going to rely on the finalised PCG, ensure you retain records as to why your agreement would fall outside of the red zone to readily resolve any potential disputes.
For more information, see Trust taxation – reimbursement agreement.
We have finalised our public advice and guidance on section 100A for trust reimbursement agreements.