Draft tax ruling on trustees borrowing to make distributions to beneficiaries [Archive]

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NigelW

10-03-2005, 10:16 AM

Hi All

a new draft tax ruling has been released by the ATO for comment.

You can look at it here:

http://law.ato.gov.au/atolaw/results.htm?basic=%22TR%202005%2Fd4%22&rank=on&dbdomain=?&prevDomainTitle=All%20of%20the%20Legal%20Database

(Not sure if I got that right - if not search ATO Legal database for "TR 2005/D4").

The gist of it is arguing that what's called the refinancing principle, from a case called Roberts and Smith, doesn't always apply to make interest paid by Trustees on borrowings to pay distributions deductible to the trustee.

Although it's a long read there's a whole range of examples in the document which might be useful info for people interested in this area.

I'd be interested to hear what Nick, Dale and Julia's thoughts are on the ATO's rejection of what they describe as the "alternative view"...bearing in mind the ATO's not always right - they're just the biggest bully in the playground :D

Cheers
N.

DaleGG

10-03-2005, 05:39 PM

Hi Nigel

I'm not convinced that the tax office are entirely right on this one, but, it is early days yet and most of the experts have yet to pass comments that will lead little people like me to understand it better.....

Dale

julia

10-03-2005, 11:05 PM

NigelW

11-03-2005, 08:57 AM

Nigel,
I am happy with the ATO's view on this one. Great idea to post it on the Forum. I will be watching for the opinions. The CPAs should be doing something like this to prepare their comments on the draft.

Julia Hartman
julia@bantacs.com.au
www.bantacs.com.au

Thanks Julia. Going through the examples it just seems very arbitrary to me when they judge something is repaying money "invested" in the trust and when it's just funding a distribution without any connection to invested money...

N.