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ATO finalises Section 100A - Guidance for Family Trusts

Do you operate your business via a family trust?

The ATO released its final guidance material on the application of section 100A on 8 December 2022–TR 2022/4 and PCG 2022/2. In doing so, it has clarified a number of issues, which is welcome.

To recap - in February 2022, the ATO updated its guidance around trust distributions made to adult children, corporate beneficiaries and entities carrying losses. Depending on the structure of these arrangements, the ATO may now take an unfavourable view on what were previously understood to be legitimate distribution arrangements.

The ATO is chiefly targeting arrangements under section 100A of the Tax Act, specifically where trust distributions are made to a low-rate tax beneficiary where the real benefit of the distribution is in fact, transferred or paid to another beneficiary, usually with a higher tax rate. The ATO’s Taxpayer Alert (TA 2022/1) illustrates how section 100A can apply in this circumstance, particularly where a parent benefits from a trust distribution to their adult child/children.

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