Are your trust documents up to date?

There have been changes to the laws relating to trusts which mean that if your trust was created prior to this year, it should be reviewed by your lawyer and accountant. If your trust does not comply, , you could find yourself with a problem and it could result in you having to pay not only more tax but penalties and interest to the Australian Tax Office (ATO).

In 2012, due to the High Court case of Bamford, the ATO issued a ruling on how they will now deal with trust income given the implications of the Bamford case. Some of the issues which have to be reviewed in trust deeds in order to comply with the rulings are:-

  1. Ensuring that your trust deed has a more expanded definition of ‘income’;
  2. Ensuring that your trust deed correctly deals with notional income such as tax and franking credits;
  3. Ensuring that your trust deed allows for income streaming such areas like capital gains and franking credits
  4. Ensure that your trust deed makes it clear that certain resolutions must be made before 30 June in any tax year; and
  5. Ensuring that you have proper documents (in the form of minutes) which reflect the resolutions made, and to prove the date the resolution was made is before 30 June if required by that date.

Also, you must ensure that the amendments are made so that they are just an amendment to the Trust Deed. Depending on the terms of the Trust Deed and its age, if you make too many amendments, that might result in a re-settlement of the trust deed and this could have significant stamp duty and capital gains tax implications. Every trust deed is different, and the implications are dependent on the property held in the trust.

All this means that your accountant and family support lawyer should be contacted to ensure that your family trust deed complies with the current laws. If you do not do so, you could find that certain transaction do not comply and if you make them, find that when audited by the ATO you are penalised for a technical breach because your trust deed does not comply.