In our 2022 March edition of KSW Insight, we explained the ATO’s new draft guidance on trust distributions that involve “reimbursement agreements”.
We understand that the ATO has received many submissions in relation to the draft guidance from the professional bodies and tax practitioners raising concerns including:
- Clarity on how to identify the appropriate risk zone for potential arrangements
- Clarification on what constitutes “tax-driven features” of an arrangement.
- The use of confusing terms, some of which require the use of value judgements (eg how do you assess what is “ordinary familial or commercial” without a value judgement?). Such value judgements may result in inconsistent treatment and outcomes.
- TR 2022/D1 requires the retention of evidence of arrangements but provides no guidance on what constitutes sufficient evidence.
The ATO will consider the feedback that it received before finalising the new guidance. This may not occur before the end of this financial year. In the meantime, they have confirmed that taxpayers can continue to rely on their 2014 guidance for trust distributions made before 1 July 2022.
The uncertainty will continue in relation to trust distributions, especially to adult children. However, our skilled accountants in Sydney will continue to keep a close eye on developments and inform you of those developments as soon as the ATO provide clarification.
If you have any questions in the meantime, don’t hesitate to contact your client manager.
Author – Darren O’Malley
*Correct as of 30 May 2022
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.
