Earlier this year, the ATO released long-awaited guidance on the application of section 100A.
With the release of TR 2022/D1, PCG 2022/D1 and TA 2022/1, these guidance products highlighted many arrangements, including past arrangements, involving trust distributions that would be seen as high risk by the ATO and which could result in the trustee being taxed at the top marginal rate (currently 47%) on trust income.
You can read our previous article on the guidance for further details.
We made a submission to the ATO raising concerns about the limited scope of the “low-risk” or “green zone” arrangements, the retrospective nature of the guidance and the lack of any guidance on many common private group arrangements (e.g. trust-to-trust distributions).
You can read our submission below.
We have continued to work closely with the ATO to update and finalise the section 100A guidance. Most recently, the ATO released consultation on proposed “additional green zone examples” which you can find here.
We made a further confidential submission to advocate for simplified guidance that will allow taxpayers to confidently self-assess their risk of section 100A applying to common scenarios.
This is in particular where the relevant beneficiary is able to establish that they received the benefit of a distribution including by making loans to related parties on commercial terms, and where trust distributions are used to repay debts including Division 7A loans via dividend and set-off arrangements.
You can find out more about our advocacy work on the website here.