Is your trust complying with anti-avoidance rules?
The ATO advised recently that it is reviewing selected trusts’ compliance with anti-avoidance rules under S 100AA and 100AB of ITAA 1936.
The purpose of anti-avoidance rules
These anti-avoidance rules are designed to prevent trustees using tax-exempt entities to shelter the trust’s net income.
The ATO is looking at situations where a tax-exempt entity is:
- entitled to income of the trust estate and
- has not been paid or notified of that entitlement within two months of the end of the income year and
- their share of the trust’s net income is disproportionate to their entitlement to trust income.
How will I know if my trust is under scrutiny?
The ATO will send out letters to selected tax agents to review certain trustee clients’ affairs.