Over the recent weeks we have sent you two updates on Treasury's exposure draft legislation containing amendments to confirm that capital gains and franked dividends can be effectively streamed, despite the Commissioner's misgivings post-Bamford, in the 2010/11 income year (Post-Bamford Streaming Amendments: What your trust deed needs before 30 June 2011 and Further update on the Post-Bamford Streaming Amendments: What your trust deed needs before 30 June 2011 and how we can help). The draft legislation is expected to be introduced into the Parliament this coming Thursday.
Just in case you missed our last updates, here is a quick refresher:
- Effectively streamed capital gains and franked dividends will be 'backed out' of Division 6 and taxed to the beneficiary on a quantum basis under Subdiv 115-C (capital gains) and Subdiv 207-B (franked dividends).
- Any capital gains or franked dividends that are not effectively streamed will be taxed under Division 6 on a proportionate basis.
- To effectively stream a capital gain the trustee must make a beneficiary 'specifically entitled' - a defined term - to the amount of the capital gain or franked distribution. Following the consultation process around the exposure draft, it is expected that there will be a requirement that the economic benefit representing the amount to which a beneficiary is entitled will also be provided to that beneficiary.
- The trustee's ability to make a beneficiary 'specifically entitled' must be based on a power in the trust deed and reflected in the trust's accounts.
If the draft legislation is introduced on Thursday, we will provide a further update this coming Friday, including guidance on what to do with your trust deeds, and more importantly, your trustee resolutions.