Trust compliance with anti-avoidance rules

The ATO has advised that it is reviewing selected trusts’ compliance with anti-avoidance rules under s 100AA and 100AB of ITAA 1936. These anti-avoidance rules are designed to prevent trustees using tax-exempt entities to shelter the trust’s net income.

The ATO is considering situations where a tax-exempt entity is entitled to income of the trust estate and:

  • ┬áhas not been paid or notified of that entitlement within two months of the end of the income year
  • their share of the trust’s net income is disproportionate to their entitlement to trust income

The ATO will send out letters to selected tax agents to review certain trustee clients’ affairs.