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Conquering Trusts

Published on 13 Nov 2012 | Took place at Swissotel, Sydney, NSW

    The Division 6 re-write is well underway however the new measures will not come into effect until 1 July 2014 at the earliest. This means that practitioners need to be aware of issues that can arise under the current Division 6 as well as issues for Deceased Estates and on-going issues that arise from the Tax Office’s current administration of Division 7A as it applies to Trusts. This seminar was designed to be an in-depth examination of trust fundamentals that goes beyond a standard introduction to trusts.
    Topics covered include:
  • trust fundamentals
  • update on trust cases
  • Division 7A and UPE’s
  • deceased estates

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Individual sessions

Trust fundamentals

Author(s):  Greg VALE

Accountants and lawyers administer trusts year in and year out, and are often advised to 'read the deed' when it comes to determining how to administer a trust. This paper covers some of what you need to know to read a deed, and also some other trust concepts that you may have been taught in university (if a lawyer) or have not been taught at all (if an accountant).

This paper covers:

  • Traps to watch out for in the establishment and structuring of a trust
  • If you need to make a capital distribution for streaming purposes, or to return capital from a unit trust, how do you find the capital distribution provision?
  • Why do you care when a trust vests, what is the rule against perpetuities and why is there often a reference to the 'issue' of King George VI in a deed?
  • How do you vest a trust properly and issues related to vesting a trust
  • When will a unit trust be a fixed trust for NSW land tax purposes – what do you look at and what has changed as a result of Sayden's case?
  • What might cause your trust deed to be defective, and what happens if your trust deed is defective
  • How can you fix a defect in a trust deed? How far can you go in varying your trust? What if there is no explicit variation power?
  • What if you have lost the trust deed? What can and should you do?
  • Apart from trusts created by deed, known as express trusts, other trusts such as resulting and constructive trusts can result in tax 'fixes' for unusual transactions – what are these types of trusts and how do they function?
Materials from this session:

Update on trust cases

Author(s):  Chris ARDAGNA

This paper covers a range of recent cases concerning trust law and tax law, including:

  • recent income tax cases concerning trusts
  • the approach of the state courts when dealing with trusts in stamp duty cases – do the state courts depart from their federal counterparts to any meaningful extent?
  • recent trust law cases, their application to tax and key points for practitioners.
Materials from this session:

Division 7A and UPEs

Author(s):  Michelle HARTMAN,  Andrew MARTIN

Since the ATO changed its stance on private company UPEs (amounts owed to corporate beneficiaries) on 16 December 2009 the application of the rules in Division 7A to trusts and beneficiaries has become more much more complicated. This paper covers what you need to know when:

  • You have quarantined pre-16 December 2009 private company UPEs – did you know that they can cause section 109XB to apply to loans to shareholders and associates in the corporate beneficiary?
  • You have to decide between paying down a private company UPE, putting in place a loan agreement, or using a sub-trust arrangement – did you know that as long as you manage the cash-flow implications, a sub-trust is often best?
  • You have put in place a written loan agreement and the private company UPE is later paid out – did you know that this doesn't remove the requirement to make minimum annual repayments?
  • You have no pre-16 December 2009 private company UPEs – did you know that there is no longer a real potential for Division 7A deemed dividends to arise where a shareholder borrows money from the trust?
  • There is a potential unreported Division 7A deemed dividend – did you know that because there is no debit to the franking account when there is a deemed dividend, that the deemed dividend rules only create a timing issue, and not a real tax burden, in most cases where there are deemed dividends?
Materials from this session:

Deceased estates

Author(s):  Brian HOR

Administering a deceased estate can be an emotionally draining and challenging experience for all parties involved. At such a difficult time, tax is generally the last thing on the mind of friends and relatives of the deceased. However, dealing with a deceased estate can often present unique and complex tax issues which need to be promptly addressed.

This paper provides some clear guidance on the tax treatment of deceased estates and how to make the estate administration process a little easier for those involved. In particular, it covers:

  • What is a deceased estate?
  • From a tax perspective, what are the stages of administration of an estate?
  • Who gets taxed on the income of the estate and when will the ‘3 year rule’ apply?
  • What are the tax implications for assets acquired through a deceased estate?
  • Tax traps that can arise when administering an estate and how to manage them
  • Tips on how to improve the tax outcomes of a deceased estate.
Materials from this session: