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Changes to SECTION 100A: Taxation of Trust Income


The ATO (Australian Tax Office) has been reviewing and making changes to the requirements relating to distributions of trust income to adult children.


Section 100A is an anti-avoidance rule that can apply where a beneficiary’s trust entitlement arose from a reimbursement agreement.


Broadly, a reimbursement agreement involves an agreement under which a beneficiary is entitled to trust income and:


· Someone other than that beneficiary receives a benefit in connection with the arrangement

· At least one of the parties enters into the agreement for a purpose of reducing tax


Changes in Section 100A

The ATO has changed the way that they will be taxing trust income, and this is a retrospective change that may impact trust distributions dating as far back as 2015.


The ATO plans to invalidate the trust distribution and tax the trustee of trust at 47% on the amount of the distribution. This may have impacts on how your trust distributes profits in the future.

​Previous Approach

Revised Approach

It had been common practice by those that use Family (Discretionary) trusts to look to spread trust income across family member beneficiaries. Trust distributions are often made to adult children for asset protection and estate planning purposes.

Sometimes, the adult children in a family may have lower tax rates than their parents, so the overall tax rate % for the family group is lower as a result of the spread of these trusts distributions.

It states that the ATO believes that parents who make trust distributions to their children to give the distribution back to them are only doing this to reduce tax rather than pass on the benefit of the distributions to those adult children. The ATO plans to invalidate the trust distribution and tax the trustee of the trust at 47% on the amount of the distribution.

The ATO have stated that they can go back as far as the 2015 tax year to review trust distributions.

If the changes to Section 100A and the way that trust income is taxed impacts you, or your family, please don’t hesitate to contact Hub Advisory Group for an appointment to discuss further.


Phone: 02 4926 8000

Email: contactus@hubadvisorygroup.com.au

Address: 275A Hunter Street Newcastle, NSW, 2300

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