Big Changes in 2023 to Tax Laws and Family Trust Laws
The last 12 months have seen some of the biggest changes in decades to tax laws and laws affecting Family Trusts.
They include:
New Tax Rulings from the Australian Taxation Office (ATO) that may dramatically restrict how you can distribute profits from a Family Trust out to your family.
A Court unwinding a Trustee’s Family Trust Distribution when 2 children complained they didn’t get enough money.
New guidance from the ATO that affects “Professionals” and restricts the way they can spread their income across their family group.
On top of this we will have a Federal Budget in May 2023 where we expect more tax and superannuation changes and the usual pre-30 June tax planning opportunities to save tax.
We want to help you with our expert tax and accounting advice to navigate all of these complex changes and make the lead up to 30 June as smooth as possible for you.
There are certain things we need to assist you with this year that need to occur in a specific order.
DISCRETIONARY (FAMILY) TRUST DISTRIBUTIONS
2023 brings the largest number of changes affecting Family Trusts for decades.
Here is the order of our key services you will need over the coming months:
In May 2023, we will review your Trust Deed to let you know if you need to consider varying your Trust Deed to comply with recent law changes
In June 2023 and based on our Tax Planning Report to you outlined below, we will prepare a 2023 Trust Distribution Resolution for any Discretionary Trusts or Family Trusts that you have. You need to sign these before 30 June 2022 or the ATO may tax your Trust at the highest rate of 47% on any trust profits.
As part of our Trust Distribution Resolution document pack that we send to you, we will also provide you with Payment Instructions for each Trust beneficiary can sign in the first week of July 2023. This new document for 2023 is needed to prove to the ATO that your Trust’s payments to beneficiaries are not part of what S100A of the tax legislation, calls a “reimbursement agreement”, resulting in tax of 47% being assessed on these Trust distributions.
REDUCING YOUR TAX + PLANNING FOR YOUR TAX PAYMENTS
Here is the order of the key tax planning services we recommend for you over the coming months:
In May 2023 we’ll consider strategies to reduce your tax after the Federal Budget.
In May/June 2023, we can provide you with a Tax Planning Report that will give you specific actions to reduce your tax, including the best way to spread business profits across family members to provide for their needs.
Based on our Tax Planning Report, we can then prepare your 2023 Trust Distribution Resolution for any Discretionary Trusts or Family Trusts that you have. You need to sign these before 30 June 2023 or the ATO may tax your Trust at the highest rate of 47% on any trust profits.
In July 2023 we can prepare a Tax Flow Plan for you. The important report will outline your next 18 months of tax payments for all individuals and entities in your group – summarised in a cashflow format with totals. This makes it so much easier for you to plan for your tax payments and discuss with us your options for reducing any PAYG instalments that the ATO may automatically assess for you.
Value to you
Family Trust Distributions
Our advice will ensure that:
Your Trust Deed doesn’t expose you to beneficiaries forcing the Trustee to pay them profits from your Trust.
Your 2023 Trust Distributions will be signed before 30 June 2023 to avoid your Trust being taxed at 47% of its profits.
You will have taken specific steps to make it very difficult for the ATO to apply its new interpretation of S100A to your Trust and impose tax at 47% on certain Trust distributions.
2023 Tax Planning Report
Our advice will help you to
Reduce your tax payable.
Work out the best way to distribute business profits to your family to provide for their needs.
Have the information needed to prepare your Trust Distribution Resolutions
Understand what your next 18 months tax payments are and when they are due.
Next Steps
Simply email or call your accountant at Salt and we will get the ball rolling.
As always, please phone or email us if you have any further questions about this recommendation.