Notes Online Home 2018 Trusts

This publication, as a whole, is available in HARDCOPY only.

 

These seminar notes cover the following topics:

• Structuring with trusts in 2018
• Latest NTAA guide to the taxation of trust income
• Advanced trust taxation issues
• Maximising the CGT small business concessions for trusts
• Unique issues affecting unit trusts
• NTAA guide to making family trust elections

 

Chapter 1

Structuring with trusts in 2018

This section of the notes will look into structuring with trusts in 2018:

• Getting trust structures right – the first time!
• Latest guide to using trusts for asset protection
• ATO cracks down on professionals using trusts
• How to rectify an existing structure that is not working

C1A1

Getting trust structures right – the first time!

 

In this section of the notes we look into the best trust for your clients, including the following topics:

• Who should take on the key roles in the trust?
• Financing considerations with trusts

 

C1A2

Latest guide to using trusts for asset protection

This section of the notes provides guidance to using trusts for asset protection:

• Does the trust actually exist?
• Recent court decisions indicate that discretionary trusts are even safer than once thought!
• What are the family law dangers with assets held in a trust?
• When will a trustee be liable for the tax debts of a trust?

 

C1A3

ATO cracks down on professionals using trusts

In this section of the notes, we highlight how the ATO has cracked down on professionals using trusts. In more detail:

• Alienation of income through discretionary trust partners or unitholders
• ‘Assessing the risk’ of allocating profits within professional firms
• How can professionals reduce the risk of an ATO audit?
• NTAA’s ‘how to’ guide to utilising service entities

 

C1A4

How to rectify an existing structure that is not working

This section of the notes aims to help you rectify an existing structure that is not working:

• Varying the trust deed
• Using the new small business restructure rollover (‘SBRR’) to ‘fix’ a structure

 

Chapter 2

Latest NTAA guide to the taxation of trust income

 

The purpose of this section of the notes is to provide a practical guide to assist with the taxation of trust income. To this end, the issues above will be addressed under the following headings:

• Background to the taxation of trust income
• Distributing trust income
• Latest guide to streaming trust income
• Tips and traps with distributing to particular beneficiaries

 

C2A1

Background to the taxation of trust income

This section of the notes covers the background to the taxation of trust income:

• Different rule for franked dividends and capital gains

 

C2A2

Distributing trust income

 

This section of the notes looks at distributing trust income:

• Understanding trust income and how it is calculated
• Making trust beneficiaries presently entitled to trust income (i.e., distributing trust income)
• Step-by-step guide to distributing trust income
• Danger areas with making trust income distribution resolutions
• What happens in the event of an ATO adjustment?

 

C2A3

Latest guide to streaming trust income

 

This section of the notes covers the latest guide to streaming trust income:

• The mechanics of streaming a capital gain
• The mechanics of streaming a franked dividend
• Case study: taxing the net (taxable) income of a trust

 

C2A4

Tips and traps with distributing to particular beneficiaries

 

In this section of the notes, we discuss the tips and traps with distributing to particular beneficiaries. In more detail:

• Distributions to minors (under 18 years at 30 June)
• Distributions to adult children and S.100A
• Distributions to exempt entities (e.g. a charity)
• Distributing to non-resident beneficiaries
• Distributions to ‘bucket’ companies
• Determining a trust beneficiary’s entitlement to the Small Business Income Tax Offset (‘SBITO’)

 

Chapter 3

Advanced trust taxation issues

The purpose of this chapter is to take a closer look into advanced trust taxation issues. These issues will be addressed under the following headings:

• Disclaiming an interest from a trust – can it be tax-effective?
• Distributing from an asset revaluation reserve
• Residency issues affecting trusts
• Traps with ‘in-specie’ asset transfers 

 

C3A1

Disclaiming an interest from a trust – can it be tax-effective?

In this section of the notes, we look at whether disclaiming an interest from a trust can be tax-effective. In more detail:

• Effectively disclaiming an interest
• The ATO’s position
• Checklist for disclaiming an interest in a trust

 

C3A2

Distributing from an asset revaluation reserve

 

This segment of the notes looks at distributing from an asset revaluation reserve:

• Tax treatment of a capital distribution from an asset revaluation reserve
• Background to Fischer v Nemeske
• The High Court decision in Fischer v Nemeske
• Implications of Fischer v Nemeske
• Other tax-related areas of concern when distributing from an asset revaluation reserve

 

C3A3

Residency issues affecting trusts

This segment of the notes looks at residency issues affecting trusts:

• Discretionary landholding trusts exposed to exorbitant State taxes – stamp duty and land tax surcharges
• The tax hit with foreign trusts distributing to Australian beneficiaries and S.99B
• Tax sting for foreign-sourced capital gains and non-resident beneficiaries – the ATO weighs in!

 

C3A4

Traps with ‘in-specie’ asset transfers

In this section, we discuss the traps with ‘in-specie’ asset transfers. In more detail:

• In-specie distribution from a discretionary trust
• In-specie distribution from a unit trust
• Summary of potential CGT events when an in-specie distribution is made by a trust to a beneficiary
• CGT implications where asset is transferred to a trust

 

Chapter 4

Maximising the CGT small business concessions for trusts

 

The purpose of this segment of the seminar notes is to provide guidance on some of these CGT issues under the following headings:

• Broad overview of the SBCs
• Step-by-step guide to applying the SBCs to trust capital gains
• Case study – applying the SBCs to a trust capital gain

 

C4A1

Broad overview of the SBCs

This section of the notes gives a broad overview of the SBCs:

• The basic conditions for accessing the SBCs
• The relevance of ‘affiliates’ and ‘connected entities’

 

C4A2

Step-by-step guide to applying the SBCs to trust capital gains

The following segment aims to give a step-by-step guide to applying the SBCs to trust capital gains.

• Does the asset pass the active asset test? (STEP 1)
• Does the trust satisfy either the SBE test or the MNAV test? (STEP 2)
• Identify any significant individuals and CGT concession stakeholders of the trust (STEP 3)
• Apply the relevant SBCs and distribute the exempt amount (STEP 4)

 

C4A3

Case study – applying the SBCs to a trust capital gain

In this chapter we discuss a case study which looks at applying the SBCs to a trust capital gain.

 

Chapter 5

Unique issues affecting unit trusts

 

This chapter discusses the unique issues affecting unit trusts. In more detail:

• Applying the SBCs to a sale of units in a unit trust
• New ATO guidance means most unit trusts can self-assess to be treated as fixed trusts
• New dangers when ‘cashing out’ an unpaid present entitlement by issuing more units in the trust

 

C5A1

Applying the SBCs to a sale of units in a unit trust

This section of the notes looks into applying the SBCs to a sale of units in a unit trust, in four steps. More specifically:

• Does the ‘unit’ pass the active asset test? (STEP 1)
• Does the ‘unitholder’ satisfy either the SBE test or the maximum net asset value (‘MNAV’) test? (STEP 2)
• Identify any significant individuals and CGT concession stakeholders of the unit trust (STEP 3)
• Apply the relevant SBCs and distribute the exempt amount (STEP 4)

 

C5A2

New ATO guidance means most unit trusts can self-assess to be treated as fixed trusts

This section of the seminar notes discusses the new ATO guidance, which means most unit trusts can self-assess to be treated as fixed trusts

• Taxation treatment of fixed trusts
• Practical difficulties with identifying ‘fixed entitlements’ in a trust
• ATO’s new compliance approach allows trusts to self-assess as fixed trusts

 

C5A3

New dangers when ‘cashing out’ an unpaid present entitlement by issuing more units in the trust

The following segment discusses the new dangers when ‘cashing out’ an unpaid present entitlement by issuing more units in the trust. In more detail:

• Division 7A treatment of interposing entities between private companies and shareholders
• ATO confirms S.109T can apply to ‘ordinary commercial transactions’
• ATO warns against using unpaid present entitled ‘unitisation arrangements’

 

Chapter 6

NTAA guide to making family trust elections

 

In this chapter of the notes we give a guide to making family trust elections. In particular, the following:

 

• Family trusts and family trust elections
• Claiming tax losses with and without an FTE
• Using FTEs to pass franking credits to trust beneficiaries
• NTAA checklist of issues to consider before making an FTE or IEE

 

C6A1

Family trusts and family trust elections

 

The following segment of the notes will consider family trusts and family trust elections

• How and when does a trust make an FTE?
• What are the benefits of making an FTE?
• When should a trustee avoid making an FTE?
• New ATO ruling raises unforeseen risks when making FTEs

 

C6A2

Claiming tax losses with and without an FTE

This section of the notes looks into claiming tax losses with and without an FTE

• NTAA guide to navigating the trust loss rules
• Distributing income from a profit trust to a loss trust

 

C6A3

Using FTEs to pass franking credits to trust beneficiaries

The following section of the notes looks into using FTEs to pass franking credits to trust beneficiaries.

 

C6A4

NTAA checklist of issues to consider before making an FTE or IEE

In this section of the notes, we give you a NTAA checklist of issues to consider before making an FTE or IEE.

 

 

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