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Foreign beneficiaries and capital gains

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In an article published in the Thomson Reuters Weekly Tax Bulletin, partner Clint Harding outlines the significance of the recent decision by the Full Federal Court on the taxpayers' appeals from Peter Greensill Family Co Pty Ltd (trustee) v FCT [2020] FCA 559 (Greensill) and N & M Holdings Pty Ltd v FCT [2020] FCA 1186 (Martin).

The cases concern the taxation of distributions made by the trustee of an Australian discretionary trust to a non-resident beneficiary sourced from gains made by the trust from the disposal of non-taxable Australian property. The Court found in favour of the Commissioner and, as a result, the role of Australian discretionary trusts as a holding vehicle for family groups with non-resident beneficiaries needs to be considered with much more care. The additional clarity provided by the Court casts further doubt on the use of discretionary trusts as the preferred vehicle for holding assets, particularly in a situation where there are (or might in future be) beneficiaries living (or trapped...) overseas.

To read Clint’s article, click here.

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