Writing in today’s Australian Financial Review, tax partner Jonathan Ortner highlights a “sleeper statement” hidden in the government’s most recent proposals on the proposed minimum tax on discretionary trusts which threatens to erode much of the practical value and certainty stemming from the High Court’s decision in Commissioner of Taxation v Bendel.
In June this year, the Court dismissed the Australian Taxation Office’s appeal and rejected its long-held position that a private company makes a “loan” for Division 7A purposes merely because it does not demand payment of an unpaid present entitlement (UPE) owed by a trust.
“The majority judgment was grounded in the particular facts of the case and the statutory language. A company that does nothing has not provided financial accommodation, and a loan requires an active transfer of value and an obligation to repay,” Jonathan explains. “But, near the end of the government’s media release accompanying the proposed minimum tax on discretionary trusts released this month, was a statement with potentially enormous consequences: ‘Legislation to address implementation of the 2018 budget measure on unpaid present entitlements ... will be progressed separately’.
“That sleeper statement deserves far more attention. Taxpayers may have won the argument about the existing law, only to have parliament impose substantially the same result legislatively. The timing could hardly be more disruptive.”
To read the full article, click here.
