Assistant Treasurer and Minister for Financial Services & Superannuation
14 September 2010 - 14 December 2011
Improving the Taxation of Trust Income
The Assistant Treasurer, the Hon Bill Shorten MP, today released for public consultation exposure draft legislation that will increase certainty for trustees and beneficiaries of approximately 660,000 trusts in Australia.
On 16 December 2010, the Government announced that it would introduce amendments, before 30 June 2011, so that beneficiaries can continue to use the primary production averaging and farm management deposits provisions in a loss year.
"Today I have released exposure draft legislation and explanatory materials that will implement this commitment. This will be very welcome news for approximately 23,000 Australian farmers who have trusts," Mr Shorten said.
On 4 March 2011, the Government released a discussion paper that canvassed options to implement the recommendations made by the Board of Taxation to:
- Better align the concept of 'income of the trust estate' with 'net income of the trust estate'
- Enable the streaming of capital gains and franked distributions.
The Government received a substantial amount of feedback from interested stakeholders following the release of this paper.
"One understandable concern raised in the submissions was the challenge of how to successfully implement the proposal to better align the concept of 'income of the trust estate' with 'net income of the trust estate' from the current income year," Mr Shorten said.
"The Government has taken those concerns on board."
As announced in the Assistant Treasurer's address to the Institute of Chartered Accountants 2011 National Tax Conference on 6 April 2011, the Government will defer consideration of the proposal to better align the concept of 'income of the trust estate' with 'net income of the trust estate' to the broader update and rewrite of Division 6 of Part III of the Income Tax Assessment Act 1936 (Division 6).
"However, the Government is aware that if there is no change to address the alignment problem, potential opportunities for tax manipulation would exist until the rewrite becomes law."
In order to address these opportunities, the Government will introduce specific anti‑avoidance rules to target the use of low tax entities, especially exempt entities, to reduce the tax payable on the taxable income of a trust.
"These rules are required to address the potential opportunities for tax manipulation that would otherwise exist until the rewrite becomes law, and will apply for the 2010-11 and later income years."
These specific anti-avoidance rules will be reviewed as part of the broader update and rewrite of Division 6.
The exposure draft legislation introducing the streaming of franked distributions and capital gains as well as the targeted specific anti‑avoidance rules is substantially, but not fully complete.
"I have decided to release this legislation early to ensure that interested stakeholders have the maximum opportunity to comment on the core changes proposed in this legislation."
The explanatory materials accompanying this exposure draft legislation will be released shortly.
"Trust tax law has been an ongoing issue for some time. These changes will provide more certainty to the many thousands of small businesses and farmers who use trusts. I encourage all interested stakeholders to make a submission," the Assistant Treasurer said.
Submissions close by 29 April 2011, to allow the introduction of the measures in the Winter sittings of Parliament.
The draft legislation and explanatory materials for both Improving the taxation of trust income and Primary production averaging and farm management deposits for trusts in a loss year can be obtained on the Treasury website.
13 April 2011