The Taxation Ruling Of TR Essay

Question:

Advise Rob and Jane on the tax implications, if any of the trust that is intended to be set up for their two sons. Clearly explain and support your arguments with reference to legislation.

Answer:

A trustee is usually held lawfully accountable for the functioning of trust. The trustee can be either an individual or company and the profits derived from the trust usually goes to the beneficiaries. The taxation ruling of TR 2006/14 states down the consequences of granting the life span right of dwelling in the property (Cao et al., 2015). The ruling also provides the capital gains tax consequences that is associated at the time of creating the life time and remaining trust interest in the property. As it has been observed from the current situation of Rob and Jane with the remaining amount of money from the sale of partnership business they plan to set up the trust for their two sons with Rob acting as the trustee of the trust. It is worth mentioning that the consequences of capital gains tax are usually different from the equal life and that of the lawful life in the property.

The legal ownership of the trust asset that is held for beneficial life interest along with the legal person acting as the representative of the deceased estate where the estate of the deceased is necessary held on trust for the purpose of giving life time benefit and the remainder owners (Braithwaite, 2017). If the trust is set up over the actual asset with the help of medium declaration and at the time of reaching settlement it results in CGT event under section 104-55.


In the existing scenario of Rob and Jane the setting up of trust results in CGT event under section 104-55 and trustee are generally held accountable for the administration of the tax affairs relating to trust (Snape & De Souza, 2016). The trustee is also responsible for management and filing of tax returns together with the payment of tax. The trustee in the current scenario Rob can make capital gains and losses derived from the CGT event resulting from the original asset after the trust is set up and is held under the trust for life interest for their two sons. Any kind of capital gains or losses that is made from the trust by the trustee shall be considered while working out the net capital gains or loss of the trustee.

In accordance with the subsection 95 (1) of the Income Tax Assessment Act 1936 capital gains will be subjected to inclusion in the net income of the trust. The capital gains are subjected tax compliance in agreement with subdivision of 115-C (Barkoczy, 2016). In agreement with the present context of Rob being the trustee of the trust set up by him for his sons the capital gains derived by him shall be subjected to included in the net earnings of Rob. In agreement with the sub-section (95) of the Income Tax Assessment Act 1936 the net income derived by the trustee from the trust shall be taken into the consideration for the purpose of tax under subsection of 115-C.

Reference List:

Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.

Braithwaite, V. (Ed.). (2017). Taxing democracy: Understanding tax avoidance and evasion. Routledge.

Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., ... & Wende, S. (2015). Understanding the economy-wide efficiency and incidence of major Australian taxes. Treasury WP, 1.

Snape, J., & De Souza, J. (2016). Environmental taxation law: policy, contexts and practice. Routledge

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