Australia’s Tax Authority Regards Bare Trusts Tax Reform
The Australian Board of Taxation has published the results of its review of the taxation of pure trusts.
The Board examined whether and how it issued legislation in relation to what it said, the widespread practice of disregarding or reviewing these trusts for income tax purposes. This practice is maintained by an administrative approach of the Tax Commissioner.
The Board estimates that these agreements will hold close to $ 4.5 trillion in licensed trustees.
The Board recommended that it now be appropriate to review certain pure trusts for income tax purposes. It states: “If the conditions of the trust are essentially the direct ownership of the assets by the beneficiary, the tax consequences should be analogous.”
Under these rules, a person would have to file an income tax return as if income, profits, and losses were personal or derived.
The Board recommended that the reform could be achieved through a feature-based approach in which trusts that have certain characteristics qualify for a review. It recommended that the government hold a consultation to determine and complete the core features and disregarded features of the agreements that would fall within the scope of a new law.
Finance Minister Kelly O’Dwyer said, “This report is an important contribution to the government’s reform agenda, and the government thanks the board for its report.”
A statement on O’Dwyer’s website states that the government will “continue to follow up the recommendations to streamline the regime for pure trusts under the regulatory reform program”. Treasury will continue to consult on the scope of potential changes, for example, in defining the core characteristics of a bare trust for taxation purposes. “