To avoid orphans** - you need to know who the parents are

In theory, given modern science, the question of who is a parent of a child should be relatively easy to answer.

As the decision in Masson v Parsons [2019] HCA 21 highlights, the answering of this question is not always straight forward.

Briefly the factual matrix involved a female asking a male friend to be a sperm donor so she could carry and bare a child. The 'couple' each entered into longer term same sex relationships with other people, however the male friend was registered on the birth certificate of the father and was actively involved and helped finance raising of the child.

When a dispute arose in relation to living and caring arrangements for the child between the biological mother and father the court confirmed:

1. There are at least three ways in which a person may be or may become a natural parent of a child depending on the circumstances of the particular case, namely genetically, gestationally and psychologically (see In re G (Children) [2006] 1 WLR 2305).
2. The question of whether a person qualifies as a 'parent' is a question of fact and degree to be determined according to the ordinary, contemporary understanding of the word and the relevant circumstances of the case.
3. To characterise the biological father of a child as a 'sperm donor' (and therefore not a 'parent') suggests that the man in question has relevantly done no more than provide his semen to facilitate an artificial conception procedure on the basis of an express or implied understanding that he is thereafter to have nothing to do with any child born as a result of the procedure.
4. This said, it was unnecessary in this case to decide whether a man who relevantly does no more than provide his semen to facilitate an artificial conception procedure that results in the birth of a child falls within the ordinary accepted meaning of the word 'parent'.
5. This was because in the circumstances of this case, the man provided his semen to facilitate the artificial conception of his daughter on the express or implied understanding that he would be the child's parent; that he would be registered on her birth certificate as her parent, as he was; and that he would, as her parent, support and care for her, which since her birth he had done.

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** For the trainspotters, the title of today's post is riffed from a line in the Beck song 'Orphans’.

View here:

(Platinum) pension** planning

In the lead up to (another) 30 June, it is worth remembering that up until the early 2000s, there were a number of planning opportunities available in relation to maximising accessibility to pension payments.

Due to perceived abuses of the system, the government and Tax Office developed extremely comprehensive anti-avoidance provisions.

While some felt that the extent of the crack down was an over reaction, by and large, all of the historical strategies were permanently removed.

While there are some, comparatively minor, planning opportunities still available, none of these can be implemented within any narrow timeframes.

In other words, for example, there is the ability to gift assets to family members or structures such as trusts, however these transfers must take place many years before access to the pension is intended.

There are specialist advisers that continue to assist in the area.

Perhaps, counter intuitively, department and government advisers are however often the best starting point to get a full understanding of the rules as they apply in any particular set of circumstances.

** for the trainspotters, the title today is riffed from the Beck song ‘Broken Train’.

Listen hear (sic):

Where’s it at?** Capital gains tax and non-resident beneficiaries

Following recent posts it is worth remembering that historically, non-resident individuals could access the 50% capital gains tax (CGT) discount on capital gains on the disposal of Australian real property or shares in land rich entities, provided that there was an ownership period of more than 12 months. 

However, for any capital gains made after 8 May 2012 by a non-resident disposing of a taxable Australian asset, regardless if the asset was owned by the individual or via a trust, there is no access to the 50% CGT discount. 

The 50% CGT discount is still available for any capital gains accrued, but not crystallised prior to 8 May 2012, although an independent valuation is likely to be required. 

Trustees of trusts with non-resident beneficiaries will need to be particularly mindful of issues such as the following: 

1. having a mixture of capital gains on taxable and non–taxable property when distributing to a non-resident;
2. if a beneficiary becomes a non–resident after 8 May 2012 and the relevant asset disposed of was acquired prior to that date; and
3. ensuring the benefit of accessing the 50% CGT discount on accrued gains as at 8 May 2012 by obtaining a valuation.

** for the trainspotters, the title today is riffed from the Beck song ‘Where’s it at’. View hear (sic): 

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):