Family Trusts, also known as Discretionary Trusts are a popular way of structuring small business in Australia, but Family Trusts are are in the ATO’s firing line with news that trustees could lose their streaming benefits under a new ruling soon to be released by the ATO.
Sean Urquhart, Tax Partner at one of Chartered Accountancy firm, Nexia Court & Co, says the expected ruling will have a serious impact on the operation of thousands of Family Trusts across the country.
“Anyone with a Family Trust should be aware of the ATO’s expected changes, as they are going to make a big difference to the way Trusts are allowed to manage the streaming of income,” says Sean.
“One of the benefits of a Family Trust is the ability to obtain the best possible tax advantage in an effective and legitimate way.
“Taxation Ruling 92/13 has significant advantages for family trusts provided the deed is correctly drafted. Unfortunately this ruling will only apply till 2009/10, after this date we are left in a state of limbo.
“It’s almost certain that the ATO will rule out streaming, such as franking credits, in Family Trusts, when it releases the ruling. This ruling could be handed down at any time.
Roughly one million Australians are members of Family Trusts, and they will all be negatively impacted by this decision”.
If you structure your small business on a family or discretionary trust, contact your accountant for more information.