Accounting groups have welcomed the Government’s plans to introduce legislation to give certainty on the streaming of income within trusts, but say the taxation of trusts is an area still ripe for reform.
Paul Drum, CPA Australia’s head of business and investment policy, says the push is a “damn good first step in the short-term and better than nothing, but still a short-term measure.”
According to the Australian Financial Review, Assistant Treasurer Bill Shorten has advised that the Federal Government will introduce legislation this week.
In March, Shorten said the Government would allow trust owners to continue the practise of income streaming, in which a trust can send different income types – such as business income, interest income and dividend income – to different beneficiaries to better manage their tax affairs.
Shorten also described trusts as a “legitimate feature of how Australians conduct their financial affairs” amid concerns of a Government crackdown on trusts in the Federal budget.
Shorten’s decision to legislate to allow income streaming came after a landmark High Court case called the Bamford case, which caused the Tax Office to raise the alarm on the legality of streaming, which can create a tax advantage for capital gains tax, dividends, farmers’ averaging, the entrepreneurs’ tax offset and business income.
Drum says by and large, the mooted legislation will fix problems for most trusts, but trusts-deeds will need to be reviewed to ensure they are up-to-date.
And more broadly, he’s calling on the Government to undertake a more holistic approach to the taxation of trusts, rather than applying an ad hoc approach.
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