Accountants urge urgent family trust amendments
Urgent targeted amendments are required with respect to family trust elections (FTEs), according to major accounting group, Chartered Accountants ANZ (CA-ANZ).
The group has written to Treasury asking it to consider urgent targeted legislative amendments in circumstances where accountants, particularly those advising private groups and family businesses have “encountered significant challenges with the current FTE provision”.
The CA-ANZ submission argues that the legislative amendments should allow a one-off opportunity to revoke or vary FTEs and interposed entity elections outside the current four-year limit, especially where historical compliance can be demonstrated.
It has urged the legislative change against the background of lost or invalid election because of different requirements for recording and making FDTEs and the change in tax over time.
The submission suggests that, because of this, original elections have been lost or multiple or invalid elections for the same entity have been made without prior knowledge of the earlier election.
It points out that a FTDT liability can be realised decades after a triggering distribution, with disproportionate penalties arising and a substantial amount of general interest charge (GIC) accruing over time.
“This can be an existential threat for businesses of all sizes and their advisers,” the CA-ANZ submission said.
It went on to point out that FTDT applies automatically, even for inadvertent distributions outside the family group.
“The penalties arising from inadvertent distributions outside the family group are disproportionate to the level of ‘mischief’ committed. The regime was introduced to target loss trafficking and inappropriate franking credit outcomes,” the submission said.
“In most cases, FTDT can apply even where such targeted transactions or mischief have not occurred, and losses and credits have stayed within the immediate family group in the normal sense.”
It also noted that outdated definitions of ‘family group’ and “family control’ did not reflect modern family structures.
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