There have been recent changes to the taxation of trusts by the Tax Laws Amendment (2011 Measures No. 5) Act 2011 which enable the streaming of capital gains and franked distributions to beneficiaries of a trust for taxation purposes.

Prior to the amendments, any capital gain realised by the Trustee and distributed to the beneficiaries would have been ‘blended’ with different types of income. Now the Trustee will have the power to distribute capital gains to the beneficiary and the gain will maintain the same ‘character’ when the beneficiary is assessed as they had in the hands of the Trustee. To take advantage of these amendments, the Trust Deed may need to be varied to give the Trustee the power to stream these distributions.

We recommend that you revisit your Trust Deed to ensure that it defines income appropriately and provides the power to the Trustee to distribute capital gains and franked distributions to nominated beneficiaries. We can review your Trust Deed and assist you in making the necessary changes in consultation with your accountant who will  determine which beneficiaries will benefit the most from distributed capital gains for taxation purposes, and that the Trustee complies with the necessary reporting requirements to ensure that any distribution made to them is valid. It is important to note that a failure to report or allocate the capital gain to a specific beneficiary within two months after the end of the relevant financial year will result in the capital gain being pooled with income and distributed according to the default provisions of the Trust Deed. In the case of franked distributions, such as the receiving of franked dividends from shareholdings, the resolution as to the distribution of the franked distribution must be made prior to the end of the financial year.

To take advantage of the amendments for the current financial year, we invite you to contact our office on {addressdetail telephone}. 


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