The Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 was re-introduced to parliament on 23 October 2019. This comes after it was first announced in the 2017-18 Federal Budget.
The amendment introduces a new system where the government will provide up to an additional 10% capital gains tax (CGT) discount for resident individuals who invest in qualifying affordable housing from 1 January 2018. This increases the maximum CGT discount to 60%.
For the discount to be received, housing investments must meet qualifications and provide proof of eligibility. Tenants must have low to moderate incomes and landowners must charge rent at a discounted rate below the private market rental rate.
A registered community housing provider (CHP) must manage the properties and the investment is to be held for at least three years before the discount applies. The discounts will go through managed investment trusts (MITs). CHPs determine the tenant eligibility criteria, including the rent charged, consistent with state and territory affordable housing policies.
Investors who already have invested in affordable housing with the National Rental Affordability Scheme (NRAS) will not receive the additional 10% discount as they already get a yearly financial incentive.
Managing a trust comes with its share of responsibilities, especially regarding tax compliance.
To assist trustees and administrators, the ATO has provided a checklist that can be used to streamline the tax process. This is a crucial tool for ensuring that the trust’s affairs are managed efficiently and effectively in accordance with tax regulations.
Let’s delve deeper into what the Resolutions Checklist entails:
Distribution Resolutions: One of the primary tasks is to determine how income will be distributed among beneficiaries for the financial year. This resolution must be documented and finalised before 30 June to optimise tax outcomes for the trust and its beneficiaries. Trustees must consider each beneficiary’s tax position and financial circumstances when making distribution decisions.
Trustee Resolutions: Trustee decisions throughout the year, such as acquisitions or disposals of trust assets, loan agreements, or changes to the trust deed, need to be documented and ratified through resolutions. These resolutions serve as formal acknowledgments of the decisions made by the trustees and provide a clear record of the trust’s activities.
Trust Income Allocation: Trust income comprises various components, including assessable income, exempt income, and deductions. Trustees must accurately determine and record each component to ensure compliance with tax laws. Proper recording and reporting of income and expenses are essential for tax purposes and may impact the tax liabilities of both the trust and its beneficiaries.
Capital Gains Tax (CGT) Considerations: Trustees must review any CGT events during the year and determine the distribution of capital gains or losses among beneficiaries. CGT decisions can significantly affect the tax outcomes for both the trust and its beneficiaries, making careful consideration and documentation are essential.
Streaming Resolutions: Some trust deeds allow for income streaming, which involves allocating specific types of income to beneficiaries based on their individual tax preferences or circumstances. Trustees need to make resolutions to implement income streaming effectively, considering the trust deed provisions and tax implications.
Minutes and Records: All trustee resolutions and decisions must be documented in writing, including minutes of meetings and any supporting documentation. Proper record-keeping is crucial for demonstrating compliance with tax regulations and providing an audit trail of the trust’s activities.
Trust Deed Review and Update: Regular review and, if necessary, updating of the trust deed are essential to ensure that it remains compliant with current laws and regulations. Trust deeds should accurately reflect the intentions of the trustees and beneficiaries and provide a solid legal foundation for the trust’s operations.
Trustees can streamline the tax compliance process and minimise the risk of errors or oversights.
However, seeking professional advice is essential if you’re unsure about any aspect of trust management or tax obligations. With proper planning, documentation, and compliance, trustees can ensure that their trusts operate smoothly and remain compliant with tax laws.
Why not start a conversation with us today to find out how we could assist you with your trust documentation?
