Discretionary Trust, Rural Succession Trust, and Fixed Unit Trust

Discretionary trust established before 7.30pm 9 May 2000

If assets have been transferred to a discretionary trust before 7.30pm 9 May 2000, attribution among the attributable stakeholders of the trust should be determined according to the degree of control capable of being exercised in the trust by the stakeholder(s).    

Discretionary trust established at or after 7.30pm 9 May 2000

If a discretionary trust:

• is established after 7.30pm 9 May 2000, or
• contributions have been made to a trust after that time,

the determination of attribution percentage among attributable stakeholders should be made with regard to the source of the assets of the trust.

If the delegate is satisfied that attributing the assets or income, or both, of the structure to the source would produce an inappropriate result, attribution should be determined according to the degree of control capable of being exercised in the trust by the stakeholder(s).     

Rural succession trusts

Rural succession trusts vary from a discretionary trust in that they hold land only. They do not trade or lodge tax returns and rarely have an associated balance sheet other than when the original transfer of the property took place. There is usually an appointor (parent) with the child acting as trustee. They are set up to minimise death duties, stamp duties and the effects of marital breakdowns. The powers of the appointor should be examined and if their only power is the prevention of sale of the land, the trustee will be attributed with the assets, with more potential to effect Centrelink and Family Payments. The concessional treatment of such trusts only applies where the limited appointorship was created prior to 1 April 2002. The appointor must have also ceased involvement in the farm partnership by 31 March 2002.

Fixed (non-discretionary) trust

Under pre-1/1/2002 rules, the income and assets generated by fixed (non-discretionary) trusts, including fixed testamentary trusts, are fully assessed against the trust beneficiaries in the fixed proportions laid down by the trust deed. The practice of assessing the asset value based on net asset backing method and the income on actual distributions to beneficiaries will continue for fixed trusts established before 7.30p.m. 9 May 2000. Fixed trusts established after 7.30pm 9 May 2000 will be assessed under the current (ie post-1/1/2002) rules.

Changes made after 9 May 2000 to a pre 9 May 2000 fixed trust

Also, if after 7.30pm 9 May 2000:

• a trust is varied or altered in accordance with a trust deed, or
• additional funds are contributed to a trust, or
• there are changes to the beneficiaries entitled under a trust,

the delegate should determine attribution among the attributable stakeholders of the trust as if the trust had been established after that date if, in the circumstances, the delegate considers it appropriate to do so. An exception would be if a beneficiary of the trust passes away and a refixing of the entitlements of the beneficiaries is required.