The ATO hasncautioned taxpayers against arrangements that seek to minimise tax by creatingnartificial differences between the taxable net income and distributable incomenof closely held trusts. Deputy Commissioner Michael Cranston said the ATO isninvestigating arrangements where trustees are engineering a reduction in trustnincome to allow taxpayers to improperly gain favourable tax breaks, ornsometimes to pay no tax at all.
Although hennoted that many people use trust structures appropriately and within the law,nMr Cranston said the ATO has seen some trustees exploit the differences betweenntrust net income and distributable income to have the net income assessed tonindividuals and businesses that pay little or no tax, and allow others to enjoynthe economic benefits of the net income tax-free.
nImportant: Clients should not act solely on the basis of the material contained in Update. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. This update is issued as a helpful guide to clients and for their private information.