Tuesday, May 11, 2021

Tax Office tracing** of trust distributions

Following on from last week’s post, arguably, the starkest example of the Tax Office’s attitude concerns its review around identification of beneficiaries of certain distributions, particularly where trust to trust distributions are involved. 

In particular, trustees are required to complete an Ultimate Beneficiary Statement where a distribution is made to another trust, failing which ultimate beneficiary non-disclosure tax is imposed on the trustee of the original trust equal to the highest marginal tax rate plus the Medicare levy. 

The Tax Office also previously established its ‘Trusts Taskforce’ which, in addition to the goal of identifying ‘egregious tax avoidance and evasion using trust structures’ is stated to be focused on: 
  1. unregistered trusts and their beneficiaries;
  2. trusts that are irregular in lodging tax returns;
  3. offshore trust dealings involving secrecy jurisdictions;
  4. sham transactions; and
  5. artificial re-characterisation of amounts.
The Tax Office has however stated that the intended targets of the Taskforce are high risk taxpayers and not ordinary arrangements and tax planning associated with genuine business or family dealings. 

** for the trainspotters, the title today is riffed from the Beck song ‘Nicotine & Gravy’. View hear (sic):