Tax Tip 179: Tax Issues when a Settlor is a Beneficiary of a Trust

Discussion in 'Accounting & Tax' started by Terry_w, 17th Jul, 2018.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A settlor can be a beneficiary under a trust.
    see
    Legal Tip 180: Can a Settlor also be a Beneficiary Under a Trust Legal Tip 180: Can a Settlor also be a Beneficiary Under a Trust

    But this will create tax consequences because of s102 ITAA36.

    Where a settlor has the potential to benefit the trustee will be taxed on the income of the trust and not the beneficiary who receives the distribution of income.

    This is why the initial settlor is excluded from the trust as a beneficiary.

    But this doesn't apply to later people who settle money on the trust - notional settlors.
     
    Last edited: 18th Jul, 2018
    Terry_w, 17th Jul, 2018
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