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Proposed testamentary trust measure released

A measure that aims to close a testamentary trust loophole has now been released in the form of exposure draft legislation, with a retrospective application to 1 July 2019.

Tax&Compliance Reporter 08 October 2019
— 1 minute read

Treasury has released exposure draft legislation that targets an “unintended consequence” that allows some taxpayers to inappropriately obtain the benefit of concessional tax treatment when involving testamentary trusts.

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According to Treasury, currently, income received by minors from testamentary trusts is taxed at normal adult rates rather than the higher tax rates that generally apply to minors.

However, some taxpayers are able to inappropriately obtain the benefit of this lower tax rate by injecting assets unrelated to the deceased estate into the testamentary trust.

The new measure will clarify that minors will be taxed at adult marginal tax rates only in respect of income a testamentary trust generates from assets of the deceased estate, or the proceeds of the disposal or investment of these assets.

The measure was first announced in the 2018–19 budget and is estimated to have a small unquantifiable gain to revenue over the forward estimates.

If passed without amendments, the change will apply from 1 July 2019.

Interested stakeholders can view the exposure draft legislation here and can submit their views by 30 October.

Proposed testamentary trust measure released
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