Tax Update

Date: 09/08/2010

The Tax Office has changed the way it treats family trusts and unpaid entitlements. It's important to understand the new rules.

The Australian Taxation Office has taken a new approach to the taxation of family trusts, which are highly popular as a vehicle for owning family businesses and managing their investments. Tax specialist Michael Jones, of Cummings Flavel McCormack, says it?means that unpaid entitlements retained by a trust may be treated as a loan, which could be regarded as an unfranked dividend and taxed accordingly. The Tax Office's change of heart follows its discovery that hundreds of millions of dollars may be tied up in unpaid entitlements which have remained in trusts for years - a tempting source of revenue. Effective from December 16, 2009, any amounts not correctly accounted for, or remaining unpaid for too long, will come under the new ruling.