To hold shares in a family business

To hold units in a unit trust

Other reasons:

The full name of the new Trustee of the Family Trust

 Full Name

First Name Middle Name Sir Name

The current physical address of the Trustee of the Family Trust

 Address
 Suburb   State :
 P/Code 

If the new Trustee is a company, what is the A.C.N. number?

 ACN     

The current physical address of the new Trustee of the Family Trust

 Address
 Suburb   State :
 P/Code 

The current postal address of the new Trustee of the Family Trust

 Address
 Suburb   State :
 P/Code 

Note: If you change the Trustee you may need to transfer assets and ask the bank to amend mortgage deeds

Specified Beneficiaries

Specified Beneficiaries are sometimes called "Takers in Default", "Primary Beneficiaries" or "Specific Beneficiaries". These people also have no right to request anything from the Trust Deed. However, if you forget to distribute the income from the Trust Deed for the last financial year or you do not distribute after the Trust ends (usually 80 years) then the Specified Beneficiaries take the proceeds. To be technical the Specified Beneficiaries’ interest is a defeasible interest or a vested interest subject to the divestment.

Often the Specified Beneficiaries are the "children of Mr Client and Mrs Client". Sadly the couple may have broken up years ago and had more children to other partners. This is bad luck. The Commissioner of State Revenue decreed years ago in most states that if you now want to change your Specified Beneficiaries then you will have to pay ad valorem (full) stamp duty. You are generally stuck with your Beneficiaries and Default Beneficiaries.

If you need to amend the Beneficiaries for Centrelink purposes then let us know.

Can the Family Trust be amended?

Not all Trust Deeds can be varied to take account of changed family circumstances or take the benefit of changes to the law. Such changes may require restricting old powers, granting new powers to the Trustee and adding new beneficiaries.

Whether desired changes can be made for your Trust Deed depends upon a number of factors including the limitations imposed by the Trust Deed, limitations imposed by the very nature of the Trust itself, limitations imposed by creditors and limitations imposed by the potential imposition of stamp duty and Capital Gains Tax on each Deed of Variation.

As is sometimes the case with pre 1984 Family Trust Deeds there may be no power of amendment at all. In this case subject to any amendment by the beneficiaries under the rule of Saunders v Vautier the Court proceedings are commenced to seek its consents to the amendments.

If the beneficiaries are sui juris (Latin for over 18 years and not an idiot) then the beneficiaries may together vary the terms of the trust in an application of the rule in Saunders v Vautier. This is often difficult given that usually, the Trust Deed contains 1000s of distant family members.

Creditors

Most mortgages and charges given by the Trustee of the Family Trust require that the Trust Deed can not be amended without the creditor’s prior written approval.

Any amendments must be approved in writing by a creditor? This question only applies if the Trustee or Trust Fund assets are subject to a security. If you leave this clause unanswered you are declaring that no approval is necessary.

 Pre 1994 Deeds

Most Trust Deeds, especially if last amended before 1993, need amending, so far as is possible, so that income, like franked dividends, is treated in the hands of the beneficiary in the same way as if they had been received directly (Income Tax Assessment Act ("Tax Act"), sections 160AQV to 160ARD and Taxation Ruling TR 92/13)

We will advise you.

Tax Ruling TR 92/13’s effect on Streaming Provisions

Your Family Trust should ensure that income distributed to a beneficiary retains the character it had when it was derived by the trustee. Whether the allocation of say a franked dividend income to one beneficiary to the exclusion of another is effective for tax purposes depends on the terms of the trust instrument. It also depends on the ability to trace the source of the distribution made to the beneficiary. In the latter case, this would require records to be maintained which separately account for different classes of trust income (Taxation Ruling TR 92/13).

In particular clause 8 of Taxation Ruling 92/13 states that the trustee should specifically place different classes of income into separate income accounts. This is so that it is possible to trace the source of each trust distribution to a particular beneficiary or to a particular class of beneficiary. Further:

Unless the trustee clearly reflects what he or she has actually done in accumulating the trust income and in distributing it to particular beneficiaries, it will be most difficult to establish, after the event, what class of income was distributed to particular beneficiaries. Clause 8(b) Taxation Ruling 92/13

We will advise you on whether your Family Trust contains general "Streaming provisions".

Dealing with Prescribed Payments

Under Prescribed Payments (often relating to contractor income) tax is usually paid at a lower rate. Sometimes Provisional Tax is payable on this type of income. Certain beneficiaries may be able to:

       benefit from this income more than others

       use Prescribed Payment System deductions to reduce the provisional tax

We will advise you on whether your Family Trust deals with "prescribed payments".

Franking Credits

At times your trust may include gross income from franked dividends (for example, section 160APQ of the Tax Act). A resident beneficiary in your Family Trust (other than a trustee of another trust estate) is entitled to a franking rebate if:

       a share of net trust income in included in the assessable income of the beneficiary; and

       some or all of that share of net trust income is attributable to a franked dividend included in the assessable income of the trust estate.

Such tax credits require special treatment as, unlike PAYE and Prescribed Payment credits, franking and foreign tax credits are not refundable. A beneficiary can only use these credits in the tax year in which they are distributed: Section 160A of the Tax Act.

Clause 6 of Taxation Ruling 92/13 states that:

Notwithstanding wide discretionary powers being conferred on a trustee, a trustee’s discretion to selectively allocate dividend income to a beneficiary to the exclusion of another may be fettered by the terms of the trust or by trust law operative in the relevant jurisdiction. The presence of a valid clause in a trust deed which expressly empowers a trustee to selectively allocate particular types of income to beneficiaries would remove uncertainty about the trustee’s power in this respect.

Your accountant may suggest that you distribute that part of the net income to those beneficiaries who are able to take the greatest advantage of franking, foreign tax and any other non-refundable tax credits and rebates available to the trust. Those beneficiaries who have made a loss or are at a low tax rate (especially if lower than the company tax rate of 36%) may derive little benefit from these credits. (The law in this area is changing once again shortly.)

We will advise you on this.

Attribution relating to distributing capital gain to beneficiaries

When the Trust derives net capital gain in the net income of the trust by virtue of section 160ZO then the Trustee needs the power to distribute that part of the net income to certain beneficiaries. The beneficiaries are treated by the Commissioner as having accrued a capital gain (via Taxation Ruling IT 2328, paragraph 13). It may be that one beneficiary has carried forward capital losses and another has carried-forward revenue losses. In this case there are tax advantages in distributing the net capital gain to the beneficiary who has suffered the prior capital losses.

For many pre-1993 Family Trusts the Commissioner, on the above facts, may take the view either:

       both beneficiaries are treated as having been presently entitled to a proportionate amount of the net capital gain and other net trust income; or

       the net capital gain loses it character and therefore no part of the trust distribution is characterised as being a net capital gain.

Both outcomes are generally unfavourable.

We will advise on whether the Family Trust deals with Attribution relating to distributing capital gain to beneficiaries.

The ongoing extension of the Capital Gains Tax regime

Professor Bernard Marks (Research Professor of Taxation Law, Melbourne University) states that:

Although there is some judicial authority to support the view that moneys paid into a trust fund from different sources are not mixed but retain their separate character until they are exhausted, the cautious trust lawyer would want to ensure that a modern trust deed would allow (or possibly even require) the trustee to account separately and keep separate any funds received from different sources. CCH Federal Tax Commentary, Full Text, paragraph 987-072

We will check your Trust Deed for the following:

       Is the Trustee allowed to account separately for income from the following sources?

       Income having an allowance for depreciation (inclusive of depreciation of buildings and plant and equipment

       Income from Superannuation investments or annuities

       Income from deceased estates and trusts (including testamentary trusts) whether trading, investment or otherwise

       Credit trading income, interest, primary production income, rents, royalties or property income

       Income from personal exertion

       Foreign source income

Expenses of the Trust allocated against income from different sources

Subject to your Adviser’s view we also suggest that trust deeds benefit by allowing the expenses of the trust to be allocated against the income from the different sources. The accounting (for income and expenses) should apply separately to both accounting income (for trust accounting purposes) and for the net income (for tax purposes).

We will check to see if the Family Trust allows expenses of the trust to be allocated against the income from the different sources.

Distributing different parts of the net accounting income and the net income separately to certain beneficiaries

Trust Deeds need to allow the trustee to distribute the different parts of the net accounting income and the net income (for tax purposes) separately to certain beneficiaries or even to accumulate such income. Such Deeds should also specify that if any income of any source is accumulated the trustee could keep the accumulated accounting and net income in separate categories.

What is the benefit? There are many benefits. For example, accumulated net income from franked dividends (which are subject to section 99A but with allowance for imputation rebates) are distributed without any further tax to beneficiaries (resident and non-resident alike).

Does the Family Trust Deed allow the Trustee to distribute the different parts of the net accounting income and the net income (for tax purposes) separately to certain beneficiaries or alternatively to accumulate such income? We will check this.

Mum & Dad as Trustees

Many older Family Trusts prohibit you distributing to Trustees. We will check this.

Undated Family Trusts

If the Family Trust is undated then you may have breached the "Rule against Perpetuity". This rule requires the trust to vest (finish up) within 80 years of the date the trust was created. We will check this.

Other Instructions (attach a separate sheet if more space needed)

Can I amend my Family Trust later?

Irrespective of what income your Family Trust is currently getting it is still important to amend problems with the family trust as soon as possible. This is for 2 reasons.

       If it is not already the case, at any time in the future your family trust can derive many different types of income.

       The law currently allows you to make the above improvements to your trust. The laws may change in the future (see Taxation Ruling IT 2121) prohibiting you from so amending the trust deed. Already changes to the Stamp Duty legislation (through out Australia) have made it difficult to amend the class of beneficiaries who are takers in default.