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ATO view on bare trusts is inconsistent with industry practice

September 2014

The Australian Tax Office has issued a "Decision Impact Statement" (DIS) in relation to a recent case in the Federal Court. 

The case was primarily concerned with tax treatment of distributions of trust capital by a foreign trust to an Australian resident beneficiary, however the ATO's DIS addressed the administrative treatment of bare trust arrangements for tax purposes. 

A bare trust is typically used in SMSF arrangements to hold investment property. 

The ATO's view is that bare trusts should generally be recognised for income tax purposes except in certain, limited circumstances. The ATO acknowledged that this view is not consistent with how bare trusts are largely ignored for income tax purposes.

The difference in views has prompted the ATO to consult with the accounting sector to discuss how it can better restate its approach on bare trusts.

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Last updated September 2014. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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