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 Unpaid Trust Distributions to a Company

What happens when a trust assigns revenue to a private company beneficiary but doesn’t pay?

The tax status of this underpaid amount was at the heart of a recent Administrative Appeals Tribunal (AAT) case in which a taxpayer successfully challenged the ATO’s long-held view (Bendel and Commissioner of Taxation [2023] AATA 3074). For many years, the ATO has held that if a trust assigns revenue to a private company beneficiary but fails to make the payment, the unpaid sum might be considered as a loan. These loans can be taxed as unfranked dividends under Division 7A of the tax rules unless they are managed using a conforming loan arrangement with annual principal and interest repayments.

This AAT decision challenges the position of the ATO, with the tax results being important for trust clients that owe unpaid trust entitlements to associated private companies. However, it doesn’t end over here. On 26 October 2023, a notice of appeal was lodged by the Tax Commissioner to the Federal Court.

Fixed-Term Employment Contracts Limited to 2 Years

From 6 December 2023, employers can’t hire an employee on a fixed-term contract that:

  • is for 2 years or more than 2 years
  • can be extended more than once, or
  • is a new contract:
    • that is for the same role as previous contracts
    • with continuity of the employment relationship between the end period of the previous contract and the new contract, and either:
      • the total time period of the contract is 2 or more years,
      • the new contract can be extended or renewed, or
      • a previous contract was extended.

30% Tax on Super Earnings on Balances above $3 Million

The draft legislation has been released by the Treasury for consultation to execute the government’s plan to maximise the tax rate on earnings on superannuation balances over $3m to 30% from 15% from 1 July 2025. This is the last step before legislation is introduced into Parliament.

From a planning point of view, for those with a superannuation balance of $3m or above, it is important to explore possible implications of your personal situation – there is no one size that matches all strategies and what is best for you will be based on how several factors impact your individual scenario.

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