This year, 30 June falls on this coming Sunday. Set out below are some issues to keep in mind on the timing deadlines for trustee resolutions.
We are also announcing the provision of a website to enable you to have solicitor-drafted documentation for any resolutions which you have been putting off to the last minute because they are too difficult. The service will operate until 5pm Thursday 27 June. There will be a fixed price of $880 (GST inc) per deed submitted. To find out more see below and go here.
30 June deadline can apply to some capital gains
Because the Commissioner has withdrawn the 2 month “grace period” to 31 August for trustees to pass present entitlement resolutions for income, 30 June is now effectively a “drop dead” date to avoid the application of section 99A for income distributions (including franked dividends). Although there is now a legislated period to 31 August in which to make capital beneficiaries specifically entitled to taxable capital gains, it is important to note that under many deeds the due date for making beneficiaries specifically entitled to capital gains will also be 30 June.
The deeds affected are those which treat capital gains or net capital gains as “income” for the purposes of the deed and require all income distributions to be made by 30 June of each year. The deeds most commonly affected are those which adopt “net income” as defined in section 95 as being “trust income” for the purposes of the deed. Those deeds represent the majority of the deeds which our firm has reviewed recently on behalf of our client accountants.
The problem only arises if clients wish capital gains to go to beneficiaries other than in accordance with income distributions (the gains will be taxed to the income beneficiaries in accordance with their present entitlements if there are no specifically entitled beneficiaries.)
However, where specific entitlements are required for trust capital gains arising in the 2013 tax year, it will be essential to address the “due date” issue and, where the deed so requires, to pass the necessary resolutions before 30 June.
Riordans Lawyers drafting service for resolutions
In the last week of June, time and work constraints will prevent us from being confident of providing timely responses to telephone or email requests from clients seeking advice on specific aspects of deeds or resolutions.
Therefore for this week we have set up a facility through our Lexidocs website to enable accounting firms to send through deeds and information using a standardised process to which we can respond promptly.
Please note that this is the only way we will be able to respond to queries on resolutions in the last working week of June. We can only guarantee a response to telephone or email queries which are following up matters submitted via our website.Under this service, resolutions tailored to meet the specific requirements of the deed and your instructions as to the intended entitlements will be turned around within 24 hours.
For each deed submitted, the draft resolutions prepared by our office will provide the required:
- present entitlements to income
- specific entitlements to franked distributions
- specific entitlements to capital gains
- (where necessary under the deed) capital entitlements to the untaxed components of capital gains to the which are necessary for some of the deeds which provide their own definition of “trust income” tailored to the requirements of the deed and made in accordance with your instructions as to which entitlements are to go to which beneficiaries.