Get ready for a brutal Federal Budget and ATO Trust S100A initial guidance

Posted: June 10 2022
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ATO Trust S100A initial guidance

The Australian Financial Review reported that Treasury Secretary Steven Kennedy appealed to Labour Albanese Government to suppress tax breaks for the rich and corporations.

And because of this, family trusts and profit splitting will be a thing of the past. Business owners will be like wages and salary earners who can’t divide their income.

READ: What is a Family Trust?

Another report from Accountant’s Daily said that the Australian Taxation Office will release a preliminary guidance on Section 100A in the next two weeks. This is a quick guide for S100A, but a more detailed response will be out later this year.

Well, get ready on this! We may need to update our trust distribution advice. Maybe in the next two weeks of June 2022…

ATO is greatly empowered by the new Government for their S100A aggression.

So, the question is:

Will the accounting professional bodies make a stand against this? Or will they get away and "roll over" again because they don't want to offend the treasury or the Government?

Let’s see what’s going to happen in the next few weeks or so. The upcoming Federal Budget in October 2022 will be a tightening one and it could be very brutal!

S100A and Trusts – Why ATO is concerned with it?

For a long time, the ATO has communicated their contempt for discretionary trusts that are frequently labelled as tax minimisation vehicles. Regardless of this, trusts continue to be a notable structure for privately-run companies, family businesses and groups, in view of its inherent asset protection. The flexibility and ability to pass assets without too many tax consequences are some of the reasons why trusts are used in family businesses. This flexibility has been the target of the ATO.

What is the issue then?

For the most part, trust distributions are made "on paper" by passing a resolution before year-end. And in many events, the sum which is conveyed on paper to one recipient or beneficiary might be utilised by someone else. 

Usually, the extent of S100A is to catch arrangements where somebody has gotten a tax reduction by going into such arrangements. The ATO is explicitly worried about circumstances where the recipient/beneficiary getting the distribution is a lower tax payer such as adult children working part time.

Section 100A gives the ATO powers to tax the trustee of a trust on "fake” distributions.

The ATO have been giving out non-binding guidance on their website so get ready!

Contact us today to help you prepare for Federal Budget and ATO Trust S100A Initial Guidance.

The Success Accounting Group team is always keeping updated and quickly gives you the tools and confidence to best help you through these tricky times!

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About Lan Nguyen

Lan is the Founder and Chief Strategist at Success Accounting Group, Melbourne based CA firm. In a matter of short 8 years she has built up a reputable Chartered accounting firm with 3 offices and a team of 6 professional accountants and support team members. Her mission is to provide Innovative and Strategic Financial advice to help her customers make smarter financial decisions today for a brighter future.

Success Accounting Group is for established business owners who would like help to grow a sustained business. As a business owner you understand what drives your business success with our accounting team taking care of the rest.

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