ARTICLE · 10 MAY 2022

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Discretionary Trusts Back On ATO Radar

Kalus Kenny Intelex

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On 22 February 2022 the Australian Taxation Office released a Draft Taxation Ruling TR 2022/D1 and Practical Compliance Guideline PCG 2022/D1 about the tax treatment of:

AustraliaTax

On 22 February 2022 the Australian Taxation Office (ATO) released a Draft Taxation Ruling TR 2022/D1 (Draft Ruling) and Practical Compliance Guideline PCG 2022/D1 (Compliance Guideline) about the tax treatment of:

trust entitlements arising out of reimbursement agreements; and
unpaid present entitlements (UPEs) of trust beneficiaries.

While still in draft form, the Draft Ruling and Compliance Guideline is intended to provide guidance to trustees of family discretionary trusts on the ATO's views on the operation of section 100A of the Income Tax Assessment Act 1936 (s 100A).

What is section 100A?

Section 100A is an anti-avoidance provision which captures arrangements where a beneficiary becomes presently entitled to trust income, but the benefit of that income is received by a person other than the beneficiary. This is generally done for the purposes of reducing a tax liability by income streaming.

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