Question:
Finalise trust distribution minutes by 30 June
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
A change to the Tax Act purportedly to allow streaming of capital gains and franked dividends became law at the end of June this year. The practical implication of the new law is that trust distribution minutes generally need to be finalised by 30 June to effectively stream franked dividends from discretionary trusts.
Over the last 18 months there have been 2 significant cases about interpretation of tax laws for trust beneficiaries: Bamford and Colonial First State.
Following these cases, the Tax Office took a new position that trustees of discretionary trusts could not stream components of income to particular beneficiaries.
In response, the Government rushed through the new law which received royal assent on 29 June. The new law inserts complex new rules to allow the streaming of franked dividends and capital gains provided there is power in the trust deed to do so.
To stream franked dividends to a particular beneficiary, that beneficiary’s entitlement must be recorded in its character as franked dividends in the accounts or records of the trust by 30 June.
The explanatory memorandum for the new law indicates that the distribution minute would suffice as account or records of the trust indicating that the distribution minute must be completed by 30 June.
For capital gains to be streamed the particular beneficiary must have their entitlement to the capital gain recorded in its character in the accounts or records of the trust by no later than the end of August (why do they make things complicated with two different dates??).
From a practical and cost effective perspective, trustees and their advisors will want to consider and document all distributions for the trust at one time only. If there are franked dividends to be streamed the minute will need to be done by 30 June. If there are no franked dividends, but capital gains to be streamed, it will need to be done by the 31 August. Putting these statutory dates aside, there is case law that indicates the resolution should be made (but perhaps the minutes could follow in due course) by 30 June for any trust distribution. The Tax Office will withdraw two old rulings that provided a dispensation to 31 August for other trust distributions.
Further, some older trust deeds require a distribution decision to be made by 30 June.
The practical implication is that minutes should be drawn up and finalised in most cases by 30 June.
NTAA Voice 206, pp. 5-6
