Question:
Trust taxation reform
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
Trust taxation will change from July 2013 after a lengthy consultation process on new laws.
A Consultation Paper on the Reform of Taxation of Trust was released in November and the Assistant Treasurer has set out the following tentative timetable for implementation:
+ Jan-Mar 2012 – Consultation forums;
+ May 2012 – Policy Design Paper;
+ May-Jun – 2012 – Consultation round tables;
+ Jul 2012 – Exposure Draft Legislation;
+ Jul-Aug 2012 – Consultation round tables;
+ Sept-Oct 2012 – Possible second Exposure Draft Legislation;
+ Nov 2012 – Legislation to Parliament; and
+ Jul 2013 – Legislation comes into force.
The Consultation Paper sets out the following five principles for the Government’s new policy framework on the taxation of trusts:1
. Tax will “follow the money” and be paid by beneficiary that receive the economic benefits from the trust;
2. The currently poorly drafted provisions should be made conceptually robust to minimise opportunities to manipulate tax liabilities;
3. The new provisions should minimise complexity and compliance costs and provide certainty;
4. The ability to stream the income components in accordance with their character should be clear (franked dividends, capital gains, foreign income etc); and
5. Trust losses should remain trapped in the trust (unlike partnerships) and be subject to special rules for offsetting losses against future income.
Three possible models for the new system were flagged:
+ “Patch” model – retain existing structure to the legislation but define income of the trust estate using tax concepts;
+ “Proportionate within class” model – beneficiaries would be taxed on their proportionate share of each class of income (e.g. capital gains, franked dividends, ordinary income, foreign income etc); and
+ “Trustee assessment and deduction” model – the trustee would record a deduction for the distribution of taxable income to beneficiaries and if all taxable income was distributed there would be no tax payable by the trustee.
Comments on the Consultation Paper are due by 10 February 2012.
WTB 1846
