The latest ATO guidance on s100A Trust distributions

The ATO has finalised its guidance on section 100A reimbursement agreements.

The ATO has stated:

• A distribution to an adult child who has a low marginal tax rate will not attract section 100A, where they simply receive or otherwise enjoy the benefit of their distribution

• The ATO will stand by its previous guidance, Trust taxation – reimbursement agreement, for arrangements entered between 1 July 2014 and 30 June 2022 for those taxpayers who relied on it.

• In most cases, the ATO will only apply section 100A within 4 years of a trustee lodging their tax return

• The ATO will not be reviewing arrangements prior to 1 July 2014 other than in exceptional circumstances, as outlined in the guidance

The following are examples of when the ATO will not apply Sec 100A

Example 1

The Trustee distributes income for the Financial Year to a minor (under the age of 18) for an amount of $416.

Example 2

The Trustee distributes income for the Financial Year to an adult child (Over 18), and the funds are physically transferred from the trust to the adult child. The trust can also pay for the adult child's expenses directly.

Example 3

The Trustee distributes income for the Financial Year to a corporate beneficiary, and the funds are physically transferred from the trust to the corporate beneficiary.

Each situation will depend on the facts and circumstances of the arrangement; if you are unsure, please contact your adviser to discuss your situation further.