Are Your Trust Distributions Ticking Tax Time Bombs?

Television Education Network

Introduction

A reasonable period has elapsed since the Australian Taxation Office (ATO) issued its guidance material (Taxation Ruling TR 2022/4 and Practical Compliance Guideline PCG 2022/2) on the application of section 100A of the Income Tax Assessment Act 1936 (ITAA 1936), dealing with reimbursement agreements. So, where are we now at with this contentious section of the ITAA 1936 and the ATO's compliance approach in practice? This paper investigates further, including:

• A review of the requirements that indicate a trust distribution could be subject to section 100A

• The tax consequences for the trustee and beneficiary if section 100A is triggered

• Potential issues if a present entitlement to a trust distribution:

  • remains unpaid - how long could be too long and what to do if it is

  • is to individuals or entities to utilize tax losses

• • Do records need to be kept documenting:

  • a beneficiary's acknowledgement of a distribution?

  • the use of the funds that a beneficiary is presently entitled to?

• How the ATO is allocating its resources to trust distributions and the application of section100A

• How the amendment period for the application of section 100A can make it:

  • a more useful tool to the ATO than Part IVA of the ITAA 1936

  • a higher risk issue for tax practitioners and trustees

• Tips to stay on the right side of section 100A

• Practical examples drawing a line between when section 100A may or may not apply

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