The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Bill Shorten

Bill Shorten

Minister for Financial Services & Superannuation

14 September 2010 - 1 July 2013

Media Release of 21/11/2011

NO.155

Over 660,000 Trusts to Benefit From Tax Reforms

A new consultation paper about modernising the taxation of trusts will give the trustees and beneficiaries of over 660,000 trusts the opportunity to have a say in their own financial future, Assistant Treasurer Bill Shorten announced today.

"The interaction of the trust law and tax laws has been an ongoing issue for some time, and it is time to resolve it for all the farmers and small businesses in Australia who use trusts to manage their financial affairs," Mr Shorten said.

The consultation paper explores the impediments to the effective operation of the trust income tax provisions in Division 6 of the Part III of the Income Tax Assessment Act 1936, as well as those hampering the effective taxation of trusts more broadly.

"The consultation paper highlights a number of options for reform to ensure businesses and individuals can continue to use trusts with confidence. The options are designed to achieve fair and consistent tax outcomes, while assuring the community that using trusts does not provide inappropriate opportunities to manipulate the tax system," he said.

The options canvassed in this paper have been developed within the broad policy framework currently applying to the taxation of trust income, drawing heavily on the expertise of the private sector, through the Tax Design Advisory Panel and the Board of Taxation. 

"Unlike the Coalition's preferred policy on trusts, the Gillard Government is not looking at taxing trusts as companies, which would be a major departure from the current law." 

"This update and rewrite is the most comprehensive review of the trust income tax provisions for years. It builds on the amendments to clarify that capital gains and franked distributions can continue to be streamed through trusts."

The Board of Taxation considered issues surrounding the definition of 'fixed trust' as part of its review of the tax arrangements applying to managed investment trusts (MITs). On 7 May 2010, the Government announced that MITs with clearly defined rights will be treated as fixed trusts.

The Government is aware that the current restrictive definition of 'fixed trust' is an issue for trusts other than MITs and considers that a review of different options for a more workable approach is warranted. 

Treasury will release a separate discussion paper on the appropriateness of the current definition of 'fixed trust' for public consultation early next year. This will allow the Government to consider the problems with the current definition and announce its response around the middle of the year.

The updating and rewriting of the trust income tax provisions responds to Recommendation 36 of Australia's Future Tax System review, which was conducted by an independent panel chaired by former Treasury Secretary, Dr Ken Henry.

Copies of the consultation paper can be obtained from the Treasury website

The closing date for submissions is 10 February 2012.

"Trusts are an important and growing part of Australia's economy. I encourage all interested parties to make a submission," Mr Shorten said.

21 November 2011