ATO ruling will double the cost of trust distribution work
The new ATO ruling on s100A will increase the price of annual trust distribution work and require additional documentation, according to Change GPS.
Australian accountants are being warned of a “world of hurt†as the ATO ruling on s100A will “at least double†the price of doing annual trust distribution work. Practice software specialist, Change GPS, is advising accountants to acknowledge that the landscape has changed and to advise their clients accordingly. Executive Director, Tim Munro, states that while some clients may be hesitant to pay the increased cost, accountants have no choice but to comply with the new requirements.
The ATO ruling requires “contemporaneous documentation†to address the issue of reimbursement agreements and to consider the circumstances of beneficiaries, as confirmed by ATO Assistant Commissioner, Chris Ryan, on a Change GPS webinar. Documentation will be required to show that trustees have considered the needs of beneficiaries and to follow up the end-of-financial-year trust distribution resolution with a payment request form for beneficiaries.
Munro warns that accountants will need to improve their record-keeping practices to reduce risk and bring their practices in line with financial planners. He mentions that accountants have not been as good at keeping records as legal advisers for trusts and high-level tax experts. Change GPS is putting together a document pack for accountants, but many in the industry feel that the ATO is stretching the application of s100A.
Munro believes that the ATO doesn't understand the ordinary commercial or family situation and that the laws, introduced in 1979 to focus on trust stripping, don't apply to ordinary family or commercial arrangements. He believes that the ATO is overreading the section and that it was not designed to cover the use of money within a family.
In conclusion, the ATO ruling on s100A will require additional documentation and increase the cost of annual trust distribution work. Accountants are advised to advise their clients of the changes and to improve their record-keeping practices to reduce risk. The industry feels that the ATO is stretching the application of s100A and that the laws were not designed to cover ordinary family or commercial arrangements.
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