Current issues with trusts and the tax system

De Silva, A, Glover, J, Narayanan, V, Nguyen, T and Westberg, K 2018, Current issues with trusts and the tax system, ATO, Australia


Document type: Commissioned Reports
Collection: Commissioned Reports

Title of report Current issues with trusts and the tax system
Author(s) De Silva, A
Glover, J
Narayanan, V
Nguyen, T
Westberg, K
Year of publication 2018
Publisher ATO
Place of publication Australia
Subjects Public Economics- Taxation and Revenue
Taxation Accounting
Taxation Law
Abstract/Summary By 2022, it is expected that over 1 million trusts will exist in Australia. Trusts are used as a vehicle for business, investment and estate planning by various segments of Australian society. There are many types of trusts, the most common type being discretionary trusts. In total, trust income in 2013-14 exceeded $340 billion, making this vehicle a defining feature of the Australian economy with trusts in the financial services sector alone accounting for over $24 billionFootnote1. Another central feature of Australia's economic landscape is its tax system and in particular the way in which it regulates the behaviour and activities of trust users. The purpose of this investigation was to examine the efficacy of the current system of taxation of trusts. Key highlights of our study include: The interactions between the trust and tax laws are being manipulated which could contribute to the sheltering of significant amounts of tax. At conservative levels this amount is estimated to be between $672 million and $1.2 billion per annum. Chains of trusts and interlinking trusts are common which may reflect a deliberate intent to create a degree of opacity with relation to trust income. Trust tax lodgment patterns differ according to trust type, however these are difficult to ascertain given the current level of information available. The current system of trusts presents significant challenges in implementing international transparency obligations and recommendations. Australian trust taxation law is remarkably different from other common law jurisdictions.
Commissioning body Australian Tax Office
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