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  • Trust liquidity issues due to COVID-19

    We understand that due to COVID-19, a trustee may experience liquidity issues which may affect its ability to satisfy a beneficiary's entitlement. This may happen where financial institutions impose restrictions that affect the way a trustee can deal with its assets.

    Where a present entitlement arose before any effect of COVID-19, in circumstances that were not a reimbursement agreement, you may need to make subsequent arrangements to meet the requirements of the financial institution. If that occurs, these arrangements will not invalidate that entitlement or cause section 100A of the Income Tax Assessment Act 1936 (ITAA 1936) to apply.

    For present entitlements conferred at the end of the last tax year, the law will apply based on the facts presented.

    We won't undertake compliance action to consider the validity of an entitlement or the application of section 100A of the ITAA 1936 in circumstances where a trustee is affected by liquidity issues due to COVID-19 and unable to satisfy the entitlement.

    We remind trustees of the importance of complying with the terms of their trust deeds. For cases under review we'll continue to apply the law.

    Our compliance approach is intended to provide relief and certainty to trustees and associated private groups who experience genuine liquidity difficulties as a result of COVID-19. We will monitor behaviour to ensure this approach works as intended.

    See also:

    Last modified: 11 Aug 2020QC 63399