Trusts in 2007: An eventful year in review — opportunities and issues for you and your clients

this article summarises the key issues and opportunities for trusts in 2007.

Duty exempt distributions of trust property - Victoria

The confusion about whether distributions of trust property to beneficiaries were 'duty exempt' under the previous section 36 of the Duties Act 2000 in Victoria) was clarified in early 2007.

Now, if the beneficiary satisfies the Commissioner that the transfer of property is not part of a sale or received for consideration, then taking a transfer subject to a mortgage does not constitute a transfer for consideration.

For further detail regarding the impact of the new laws on fixed trusts, discretionary trusts and unit trusts and similar exemptions in other jurisdictions, see our full article here.

Service entity arrangements — 'Phillips' arrangements

On 30 April 2007, the ATO's amnesty on Phillips arrangements expired. This marked a shift by the ATO from an education?based approach to a compliance-based approach for service entities charging fees in excess of commercial rates to related parties.

To take advantage of tax deductible service fees and charges and avoid being audited, practitioners are reminded to: :

  • consider whether new Phillips arrangements have an objective commercial connection with the business; and
  • make sure fees and charges are correctly calculated.

The queries posed by the review continue to be relevant to new Phillips arrangements — as does the ATO's Guide on the topic. Both of these are examined in further detail in our full article here.