The lead up to 30 June means consideration on how to distribute any Trust income for the year.
Minimising tax is always a key strategy, but doing so without triggering Section 100A of the tax legislation is key to ensuring you don’t end up being charged the top marginal tax rate on your earnings.
Let me explain……
Certain situations where a trust distribution is not actually paid to, or applied for the benefit of the beneficiary…..or someone other than the beneficiary benefits from the trust’s income could imply a “reimbursement agreement” which will trigger Section 100A of the tax legislation. This results in the Trustee being charged tax on the income at the top marginal tax rate, plus medicare levy.
The ATO are targeting trust distributions, and looking closely at distributions to low-tax adult children, loss trusts, distributions of interest and franked dividends to non-resident beneficiaries, and circular distributions between trusts and companies. If your trust undertakes any of these distributions, they need to be carefully considered and any distribution arrangements fully and correctly documented or you will trigger the attention of the ATO.
Before June 30 is the time to talk with your advisor about your trust distribution, to ensure a Section 100A Risk Assessment has been done, to ensure your distributions and associated documentation is in order, to avoid attracting unwanted attention from the ATO.
To book your discussion, please contact your trusted PJT advisor now on 07 5413 9300.