PodMD
The financial journey of a doctor is unique and complex. DPM Financial Services is a specialist medical financial advice firm that aims to educate doctors of Australia to make the right financial decisions and achieve their financial goals.
DPM Financial Services is all about you getting the right advice that suits your personal and professional needs and making sure you have confidence in your financial future.
Today I’d like to welcome to the PodMd studio Robert Giblin from DPM.
Robert is a Chartered Accountant and Registered Tax Agent who specialises in advising the unique needs of medical professionals in tax compliance, structuring, wealth creation and risk management. Robert provides tax-related guidance and support in building wealth and maintaining financial health so his clients can focus on their professional lives.
*We do hope you enjoy this podcast but please remember that the information discussed here is of a general nature and is not intended to serve as advice. The views and opinions expressed in this podcast are those of DPM, not PodMD.
DPM Financial Services recommends you obtain advice concerning specific matters before making a decision.
Rob, thanks for talking with us on PodMD today.
Robert Giblin
Thank you for having me.
PodMD
The topic of today’s discussion is the upcoming changes to trust distribution rules.
Rob, can you briefly explain what these changes are and who will be impacted?
Robert Giblin
If you were so inclined to assist your child with their education, and you want us to pay those university fees, then absolutely. The obligation for the liability of university fees sits with the child.
They sign up to the course themselves. They are liable for the debt themselves. So if you make a distribution as trustee from your family trust to your child for the equivalent amount, and I’ll suggest dollar for dollar, and then those fees are paid direct from the trust, then that is likely to be acceptable.
However, under the same situation, if you were to make a distribution for the same dollar amount and keep those fees yourself as the trustee and your child then incurred a hex debt, there is no benefit to the child.
And it is highly likely at this stage, and even though we are in a draft ruling, to get the ATO’s attention, and once you’ve drawn the ATO’s attention, it opens up Pandora’s Box for them to go back to 2014. And if anything continues, any misbehaviours prior to going on during that period, they can even go back prior to 2014 to look at trust behaviour. So, the draft ruling, it came out mid February. It is just the draft ruling. It’s the ATO’s view of what they’re likely to do with regards to interpretation of the act. However, there is a pending case that in February went against the Commissioner of Taxation on this topic, and it is likely to be appealed.
We are likely to see that sometime in the next six months. But at this stage, the accounting profession is looking at dealing with it now, paying attention to its clients, knowing that 30 June 2022 is on the horizon and that trust resolutions need to be applied. So, at this stage, we anticipate it will be happening in the next six months. And we’ll be discussing with our clients, watching intently, discussing with CPA, CA A, NZ, the Tax Institute, with regards to the ongoing discussion with the ATO as to ensuring that the draft ruling and the ATO’s compliance guides more in line with their intentions and the legislation.
PodMD
Right.
Robert Giblin
So, the ATO is they are consulting with industry. They are waiting the outcome of this? Well, actually, they’re considering whether they should be appealing the ruling with regards to what is called Section 100 A and Division Seven A and identifying within themselves and within the market guidance on reimbursement agreements, unpaid present entitlements and beneficiary present entitlements and accountants at the same time are also trying to engage with the ATO and with their peak bodies so they might get some more informed and a more focused approach.
So, it’s a better advise our clients moving forward. Listeners need to actually go back and have a look at their trusts, have a look at how they’ve been distributing to their children. To see whether the children have actually benefited from the trust distributions, they need to pay attention to unpaid present entitlements and Division Seven
A loan to see, again, whether the benefit is actually sitting with the intended beneficiary or the benefit is otherwise, I guess, outside of scope and potentially more inclined with tax avoidance or tax deferral or trust stripping activities.
Yeah.
Look, talk to your accountant. I would hold off on doing any of your resolutions until you’ve done so there is a fair amount of water to go under the bridge.
And if you’ve had a look at your trusts and you’ve gone back historically and you’ve identified some negative behaviours that we’ve discussed, then you need to stop those moving forward, which your accountant can help with, and that will likely assist with avoiding the ATO spotlight moving forward.
My pleasure. Thank you for having me. Having to move it. That’s all right.