Understanding Changes to Tax Benefits for Testamentary Trusts
Testamentary trusts have been a popular tool for estate planning, especially when minor beneficiaries are involved. Simply put, a testamentary trust is created through a valid Will, where assets are held by a trustee for the benefit of beneficiaries.
Just like with trusts created during a person's lifetime, beneficiaries of testamentary trusts are taxed on the income they receive from the trust. This income is determined based on their share of the trust's taxable income. However, recent changes aim to address potential misuse of tax concessions associated with testamentary trusts.
Why the Change?
While testamentary trusts offer tax advantages, some taxpayers have exploited these benefits in unintended ways. To address this, the government proposed amendments to enhance the integrity of how testamentary trusts are taxed.
Important Tax Warning: Retroactive Amendments
The proposed changes, outlined in the Treasury Laws Amendment (2019 Measures No.3) Bill 2019, could have retroactive effects. If passed, these changes would apply to assets transferred to testamentary trusts on or after July 1, 2019. Trustees of testamentary trusts need to be aware of these potential amendments and how they might affect the taxation of trust income for minor beneficiaries.
Stay Informed:
As the Bill is still pending approval, trustees must stay updated on these developments and understand their implications.
If you have questions or need guidance on navigating these changes, don't hesitate to contact Tax Ideas Accountants & Advisers at +61 2 83181545 or schedule an appointment through our live calendar.