The Role of Trusts in Family Wealth Management – 5 program video webinar series

Program 1: Trust Distributions and Section 100A: Where to from Here?

Since the ATO first issued its draft guidance material on section 100A early in 2022, tax advisers have had to come to grips with the realisation that the world of trust distributions has significantly changed. With the ATO finalising its guidance material, now is the time to take stock to ensure that future trust distributions can stand up to ATO scrutiny. This session is designed to assist, including:

• Identifying exclusions under “ordinary family or commercial dealing”, including:
  • the core test
  • factors that may lead to failing the test
• The ATO’s compliance approach (PCG 2022/2), including where it may be important to:
  • pay present entitlements within 2 years
  • place entitlements on commercial terms
• Dealing with distributions that involve:
  • adult children
  • loss company or loss trust beneficiaries
  • bucket companies
• Can the commercial debt forgiveness rules have implications with section 100A?
• How record keeping requirements have changed for trust distributions
• Consequences of falling foul of section 100A
• Lessons from recent cases
• Practical case studies

Program 2: Counting Down From 100: Is 99B the Next Sleeper to be Awakened?

Whilst section 100A was introduced into the Income Tax Assessment Act 1936 back in 1979, it would be fair to say it may have only become entrenched in some advisers’ minds in recent times. In that same year, section 99B relating to the receipt of trust income not previously subject to tax, was also introduced into the 1936 Act. Is this the next sleeper to catch advisers off guard, with a scope far broader than first realised? This session looks into finding out the answer, including:

• What type of income has the potential to attract section 99B?
• Is section 99C (interwoven with 99B) worded so broadly that advisers may be forgiven for saying “I didn’t see that coming”?
• The tax implications if section 99B applies, including the interest component (sec. 102AAM ITAA 1936)
• Does section 99B extend to proceeds from a CGT event involving units in a foreign managed investment trust, including whether it makes a difference if the units are “redeemed” or “sold”?
• Interaction with disregarded capital gains in foreign trusts (TD 2017/23, TD 2017/24)
• How do the rules apply to foreign deceased estates?
• Strategies to reduce the risk of section 99B applying
• Practical examples

Program 3: Preventing Future Challenges: Creating Bullet-proof Trustee Distribution Resolutions

A recent case of Owies has put into question whether the “discretionary” in a discretionary trust is a proper use of that term. This session reviews the impact this case may have on trustee distribution resolutions, including:

• What are the tax implications if a trust distribution is deemed invalid?
• To what extent does a trustee need to give “real and genuine consideration” to potential beneficiaries?
• What records should be maintained to support a trustee’s decision to distribute income or capital?
• How do you effectively change a trustee, appointor or guardian?
• How might Owies case affect pre 30 June trustee distribution resolutions?
• What lessons can trustees and advisors take from the case?
• The tax consequences where flexibility is removed and a trust is:
  • unitised (PBR 1051872353826)
  • arranged to hold particular assets for particular beneficiaries (TD 2012/21, TD 2019/14)
• Practical examples

Program 4: Converting a Trust to a Company: Is it Time to Make a Change?

There are a myriad of reasons why consideration may be given to changing a structure from a trust to a company. These considerations could range from the difficulties complying with complex trust related tax rules or a potential purchaser preferring to buy shares in a company rather than acquire assets from a trust. But how do you go about the restructure? This session is designed to assist you in the process, including:

• The type of situations which may benefit from a change of structure from trust to company
• The CGT rollovers available for a trust to company restructure, including:
  • Subdivision 122-A ITAA 1997
  • Subdivision 124-N ITAA 1997
  • Section 328-G small business restructure rollover
  • Subdivision 615 ITAA 1997
• Which rollovers can a discretionary trust utilise?
• Are there situations where the small business CGT concessions can produce a more tax effective outcome than the CGT rollovers?
• How is GST treated for the CGT rollovers and small business CGT concessions?
• Can the accounting treatment for a rollover have an impact on future tax consequences?
• A checklist of non tax related matters to consider, including how the restructure affects:
  • commercial arrangements such as leases, employment contracts and entitlements, suppliers and customers
  • stamp duty
• Case study

Program 5: Trust Vesting Dates: Avoiding a Tax Disaster

Most trusts have a limited lifespan. Knowing when that termination date is to occur and the action to take if that date is fast approaching, is crucial in avoiding any adverse tax consequences that can arise. This session explores the topic of trust vesting, with some trips and traps to look out for along the way, including:

• Why the trust deed is so important
• What are the tax implications when the vesting date arrives?
• Can you extend the vesting date?
• What to do if your trust has already passed its vesting date, including
• How are distributions of trust income treated that occur after the vesting date?
• Case studies exploring the consequences if a trust within its own vesting date, distributes income to a trust whose vesting date has passed?
• Lessons from cases, including:
  • McGowan and Valentini Trust [2021] VSC 154
  • Hancock v Rinehart  [2015] NSWSC 646
  • Palato Pty Ltd v Herro [2015] NSWSC 445