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Testamentary trust measure a ‘sleeper issue’ for SMSFs

Testamentary trust measure a ‘sleeper issue’ for SMSFs

SMSFs, testamentary trust measure
Miranda Brownlee
09 May 2018 — 1 minute read

A tax integrity measure around changes to the concessional tax rates received on income from testamentary trusts may potentially have estate planning implications for SMSFs also, says an industry lawyer.

From 1 July 2019, the government announced that it intends to introduce a tax integrity measure that would mean the concessional tax rates available for minors receiving income from testamentary trusts will be limited to income derived from assets that are transferred from the deceased estate or the proceeds of the disposal or investment of those assets.

The budget papers explained that currently, income received by minors from testamentary trusts is taxed at normal adult rates rather than the higher tax rates that generally apply to minors.

“However, some taxpayers are able to inappropriately obtain the benefit of this lower tax rate by injecting assets unrelated to the deceased estate into the testamentary trust,” said Treasury.

“This measure will clarify that minors will be taxed at adult marginal tax rates only in respect of income a testamentary trust generates from assets of the deceased estate or the proceeds of the disposal or investment of these assets.”

View Legal director Matthew Burgess said it is unclear at this stage whether superannuation assets would be considered to be outside the deceased estate but believes this could potentially be a “sleeper issue for SMSFs” depending on what details come out about this policy.

“There are a whole raft of questions here and your preferred asset protection strategy may be undermined by the potential tax downsides of going into the trust,” he explained.

Testamentary trust measure a ‘sleeper issue’ for SMSFs
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