Improving the taxation of trust income – draft legislation released for comment

Key Points

• The Assistant Treasurer has released for public consultation exposure draft legislation and related material to enable the streaming of franked distributions and capital gains and to target specific anti-avoidance opportunities involving low tax entities
• The Assistant Treasurer has also released for public consultation exposure draft legislation and explanatory materials that will allow beneficiaries to continue to use the primary production average and farm management deposits provisions in a loss year.

On 13 April 2011, the Assistant Treasurer, the Hon Bill Shorten MP, issued a media release on improving the taxation of trust income.

In it he announced the release for public consultation of: 

• Exposure draft legislation to enable the streaming of capital gains and franked distributions and to ensure that low tax entities cannot be used inappropriately to reduce the tax payable on the taxable income of a trust. Draft explanatory materials have yet to be released but, in the interim, Treasury has released an advanced summary of that material.
  
  As announced in the Assistant Treasurer’s address at the Institute’s National Tax Conference on 6 April 2011, as a consequence of substantial feedback from interested stakeholders the government has deferred consideration of its proposal to better align the concept of 'income of the trust estate' with 'net income of the trust estate' until the broader update and rewrite of Division 6 of the Income Tax Assessment Act 1936. This is the approach recommended in the Joint Accounting Bodies’ submission on the changes proposed in Treasury’s 4 March 2011 discussion paper to deal with high priority issues arising from the Bamford case

• Exposure draft legislation and explanatory materials that will allow beneficiaries to continue to use the primary production averaging and farm management deposit provisions in a loss year. This measure was announced on 16 December 2010, as part of wider reforms to the taxation of trusts.

The due date for submissions to Treasury is 29 April 2011. If you have any comments on the draft legislation and related material please send them to Tax Group by 22 April 2011.

Article last updated 6 February 2012