If your trust deed was created more than two (2) years ago then chances are it does not comply with the principles espoused in Commissioner of Taxation v Phillip Bamford & Anor Phillip Bamford & Anor v Commissioner of Taxation [2010] HCA 10 (Bamford).
Older trust deeds that were settled prior to the decision in Bamford may result in some adverse consequences for the trustee, such as:
- not being able to make a determination on how income is defined at the end of the financial year;
- not being able to assign particular expenses against particular income categories; and
- not being able to distribute specific income to particular beneficiaries.
Furthermore, this may result in some beneficiaries being liable to pay tax on amounts that they may not receive and or are not entitled to receive.
Trust review process
When reviewing the trust deed, Dundas Lawyers will carefully consider each proposed amendment to ensure that it won’t trigger a resettlement of the trust or otherwise give rise to any legal consequences. A resettlement of the trust could result in adverse consequences such as the liability for capital gains tax or stamp duty.
When revising the terms of the trust, Dundas Lawyers will examine the trust deed to:
- ensure that the trust deed includes a definition of trust income including capital gains;
- ensure that the trustee has the discretionary capability to adopt a different concept of income;
- make sure that the trust deed provides the trustee with the power to distribute certain categories of income (both income and capital) to particular beneficiaries;
- remove the trustee requirements to distribute income or make a determination of what type of income applies prior to the end of each financial year; and
- review the powers of the trustee and update their powers where necessary.
Further information
If you would like further information about how Dundas Lawyers can assist you with any aspect of trust deeds, contact us for a confidential and obligation-free discussion:
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
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