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It used to be easy to do a disclaimer of trust income.
Disclaimer of Trust Income
In the last episode we covered the Carter Case – if you haven’t listened to ep 361 yet, please do so, since this episode will make a lot more sense if you do.
So in the last episode, we discussed the Carter Case where the taxpayers had won 3:0 in 2020 at the Full Federal Court. But now comes the High Court in 2022 and rules with 5:0 the exact opposite.
In this episode, Andrew Henshaw of Velocity Legal in Melbourne will tell you what happened, and what the High Court ruled. Here is what we learned but please listen in as Andrew explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Disclaimer of Trust Income
A disclaimer of trust income used to be easy. Now a disclaimer of trust income after year-end is like resurrection after death. Not possible.
For tax purposes, you can’t disclaim trust income after you have become presently entitled as of the 30th of June. That is what the High Court unanimously ruled 5:0 in 2022.
Once presently entitled, you got the income in your tax return.
Legislator Needed
This rule opens the door to shams. You can nominate anybody as a beneficiary and then strip the assets out of the trust. And then this ‘anybody’ will have to pay tax on income they never received.
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Last Updated on 05 September 2022
