New rules regarding the streaming of capital gains and dividends received royal assent on 29 June 2011.  To take advantage of these new rules, it is critical that:

  • to stream capital gains, you record in the accounts or records of the trust ('records' include distribution minutes) that a beneficiary is specifically entitled to an amount of a capital gain by 31 August.
  • to stream franked dividends, you record that a beneficiary is specifically entitled to an amount of a franked dividend by 31 August (the Commissioner will only allow this practice for franked dividends for the 2010 / 2011  year - see the Commissioner's publication 'Improving the taxation of trust income').  

It is also critical that the trust deed allows the trustee to classify amounts of income by source and make distributions of that classified income. 

We have prepared a sample set of distribution minutes for capital gains and franked dividends based on the Hall & Wilcox standard trust deed.  More information on the new rules are contained in our earlier updates.

Ongoing review of trust deeds

Further legislative changes affecting the taxation of trusts are expected later this year as the government undertakes a broad review of the tax rules.  As such, it may be necessary to amend trust deeds in the future to reflect any changes.  It is critical that tax practitioners continually review their clients' trust deeds to ensure they comply with any changes.