Legislation was enacted on 29th June, 2011 that impacts the taxation of trusts. The legislation introduces two new anti-avoidance rules and allows streaming of capital gains and franked distributions to beneficiaries for tax purposes. The changes apply from the 2010-11 income tax year.
As a result of the practical difficulties associated with the law being enacted so close to the end of the income year, the ATO has put in place two administrative arrangements in respect of the application of the new law to the 2010-11 income tax year.
For the purposes of making a beneficiary specifically entitled to a franked distribution of a trust, we will extend the time for trustees to record a beneficiary’s entitlement to a franked distribution to 31st August, 2011 if the trustee has the same period in which to make beneficiaries presently entitled to trust income.
The ATO does not intend to select cases for review or audit for the sole purpose of determining whether the purported streamlining of capital gains or franked distributions by a trustee is tax effective.
