The Tax Institute
Actions of trustees in administering trusts are increasingly being challenged by beneficiaries. Such challenges often come to light with disputes as to the validity of amendments to trust deeds and the identity of the appointor. These issues often bring to light other deficiencies in trust administration with some of the most significant being the potential invalidity of the trustee’s year end resolutions concerning the appointment of trust law distributable income.
This paper considers invalid trust distributions through a technical trust and tax law lens. This paper addresses
Issues arising when preparing resolutions noting the trust deed.
What are the obvious and not so obvious reasons why a trust distribution may be invalid?
A consideration of recent cases on trust formalities.
Taxation of distributions where there is an invalid appointment.
What happens if there was a “balance” appointment?
What are some practical solutions to the problems presented?
Legislative references are to the Income Tax Assessment Act 1936 (ITAA 1936), the Income Tax Assessment Act 1997 (ITAA 1997), the Taxation Administration Act 1953 (TAA 1953), the Taxation Laws Amendments (2011 Measures No 5) Act 2011 (TLAM No 5 2011) and the Corporations Act 2001 (CA 2001).
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