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Tax Issues with Modern Trusts

Published on 25 Sep 2008 | Took place at Holiday Inn, Adelaide, SA

This event was aimed at all practitioners advising clients in the area of trusts and estate & succession planning.

Could the issues associated with the use of trusts for estate & succession planning purposes and the calculation of trust income and net income become any more complex? With almost 600,000 trusts currently lodging income tax returns in Australia, it is essential that practitioners fully understand the benefits for their clients of using trusts and, perhaps even more importantly, the issues associated with determining the net income of a trust for tax purposes.

This event covered the potential benefits of using trusts domiciled in South Australia for estate & succession planning purposes and the uncertainties regarding the calculation of net income and trust income following the Full Federal Court’s decision in Cajkusic v FCT.

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Individual sessions

Avoiding the vesting day: Trusts domiciled in South Australia

Author(s):  Michael BUTLER

Note: This paper was also presented at the Darwin Seminar on 28 November 2008.

Alone among Australian jurisdictions, South Australia provides trusts with perpetual succession. This paper examines the long-term CGT risks of "lives in being" and 80-year trusts (the E events) and looks at the possibility of establishing estate planning trusts in South Australia to avoid the resulting problems. Issues covered include:

  • what steps are necessary to make a trust domiciled in South Australia?
  • does it matter that the trust's property and/or its control is elsewhere?
  • how do you change the domicile of an existing trust?
  • can you extend or eliminate the perpetuity period of an existing trust without CGT and State stamp duty problems?
Materials from this session:

Getting trust distributions right after Cajkusic

Author(s):  Michael BUTLER

Note: This paper was also presented at the Darwin Seminar on 28 November 2008. 

This paper covers issues such as:

  • the concepts of "net income", "income of the trust estate" and "distributable net income"
  • the meaning of Gleeson CJ's obiter in the ANZ Savings Bank case and whether the Cajkusic interpretation is correct
  • the various kinds of income clauses in trust deeds - (a) accounting income, (b) section 95 income and (c) income as determined by the trustee - and the effect of those formulations on tax liability
  • detailed examples of trust distributions involving capital gains, franked dividends, exempt income, rental income, disallowed deductions, and other mismatches between trust income and section 95 income.
Materials from this session: