ATO audit warning - family trust elections - when an interposed entity election is appropriate

A recent area of concern that our taxation team has been increasingly encountering is with whether distributions made by a family trust are within the family group and whether said distributions will attract the 47% family trust distribution tax. We expect that in the context of family trusts, the ATO will allocate further audit resources in determining whether the distributions are compliant which is made more abundantly clear with the ATO's key priority are from its Next 5,000 report suggesting that they will scrutinise succession planning arrangements more closely

It is therefore important to determine whether your arrangements within your family trusts are compliant with schedule 2F of the Income Tax Assessment Act 1936 and whether you require an interposed entity election (IEE). In our experience, IEEs are common given that family trust structures may involve trusts being interposed between the family trust and ultimate distributions to family members. These