Trusts
• A minor (ie aged under 18) can receive up to $3,000 in non-taxable distribution for the 2009/10 income year.• If a company is owned by a discretionary trust, consider whether a family trust election (FTE) is needed to ensure any losses or bad debts incurred by the company will be deductible.
• If shares are owned by a discretionary trust, consider the necessity for the trustee to make a FTE to ensure any franking credits attached to the dividends will not be ‘wasted’.
• If a FTE has been previously made, avoid distributing outside the family group to avoid the family trust distributions tax.
• A recent High Court case confirmed that it is correct to apply the proportionate approach if the net income of a trust for tax purposes exceeds its accounting income.
• The Court also affirmed that the trustee can distribute capital gains as income of the trust for tax purposes if the trust deed permits it.
• Avoid retaining income in a trust because the income may be taxed at 46.5%.