Update from ATO on trust reimbursement agreements
Perhaps some good news on concerns over the recent ATO “attack on family trusts”.
In a media release on 5 May 2022, the ATO has “acknowledged there has been significant interest in its draft public advice and guidance relating to trust reimbursement agreements and unpaid present entitlements. In response to the level of community interest, the ATO said it will extend the public consultation period for the guidance, which ended on 29 April 2022. Importantly, the ATO also said: “The vast majority of small businesses operating through a trust are not operating in a way that will attract section 100A. A distribution to an adult child who has a low marginal tax rate will not attract section 100A where they simply receive or enjoy the benefit of their distribution”. The ATO also said it is not concerned when profits from the family business are distributed to members of the family who work in the management of the business and then that family member chooses to reinvest the profits in the business. Further, it emphasised that it will not be pursuing taxpayers that entered into arrangements between 1 July 2014 and 30 June 2022 where, in good faith, they concluded that section 100A did not apply to them based on the previous 2014 guidance.
It certainly seems that 2021 and 2022 trust distributions to adult children are not going to be attacked. Their statement also seems to hold out some promise of “work as usual” for most simple family trust distributions. However, let’s wait to see what the final outcome is after the results of the extension of public consultation.
In the meantime, please contact our office if you wish to discuss your particular circumstances.