Families, small businesses and wealthy investors enjoy a favourable tax win from the Gillard government in a decision that has removed the threat of family trusts being taxed at company tax rates.
Yesterday, Assistant Treasurer Bill Shorten announced that the government would continue to allow the traditional interpretation of trust law on income distribution, despite a contrary decision by the High Court in March last year.
Tax practitioners welcome the good news, saying it restores clarity and certainty to a large number of small businesses, farmers and other investors who employ more than 600,000 discretionary trusts.
Mr Shorten said the government would adopt two recommendations of the Board of Taxation to simplify the tax law following the Bamford High Court decision.
- Legislation will clarify the definition of the income of a trust estate, so a beneficiary will not have to pay tax where they have not had a payout from the trust.
- It will also allow the streaming of capital gains and franked distributions to beneficiaries, which is often used to minimise tax.
These changes will be applied this financial year.
To see how trusts might be used in a Will, feel free to see what Armstrong Lawyers can offer on our Drafting Wills and Estate Planning page.