Government vows not to tax trusts as companies
The Federal Government has released a new consultation paper on modernising the taxation of family trusts and declared it is not looking at taxing trusts as companies.
The declaration was made by Assistant Treasurer and Minister for Financial Services, Bill Shorten, who claimed such a move was possible on the part of the Federal Opposition, and would represent a major departure from the current law.
Releasing the consultation paper, Shorten said it represented an opportunity for the trustees and beneficiaries of over 660,000 trusts to have the opportunity to have a say in their own financial future.
He said the interaction of the trust law and tax laws had been an ongoing issue for some time, and it was time to resolve it "for all the farmers and small businesses in Australia who use trusts to manage their financial affairs".
The Treasury documentation attaching to the review pointed to five principles which would inform the review process:
- Tax liabilities in respect of the income and gains of a trust should ‘follow the money’, in that they should attach to the entities that receive the economic benefits from the trust.
- The provisions governing the taxation of trust income should be conceptually robust, so as to minimise both anomalous results and opportunities to manipulate tax liabilities.
- The provisions governing the taxation of trust income should provide certainty and minimise compliance costs and complexity.
- It should be clear whether amounts obtained by trustees retain their character and source when they flow-through, or are assessed, to beneficiaries.
- Trust losses should generally be trapped in trusts subject to limited special rules for their use.
The Treasury documentation said that, in addition to retaining the broad policy framework that currently applies to the taxation of trust income, the Government remained committed to its fiscal strategy. Therefore, any changes made as part of this process would have to be broadly revenue neutral.
AUTHOR
Mike Taylor
Recommended for you
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
