STEP Australia, which represents specialists in trusts, estate planning and in supporting the needs of families, has contacted the Department of the Treasury to raise concerns with a tax law that operates differently across the country according to where a person lived, died and the location of their wealth.
Federal tax law Section 102AG(2)(d)(ii) of the ITAA 36 allows a parent to permanently dedicate a part of an inheritance to the benefit of children of a deceased person and recognise the income as excepted income that bears ordinary taxation.
Trusts established under this rule are commonly described as ‘de facto testamentary trusts’ or ‘post mortem trusts’, and allow the partial overcoming of the lack of an estate plan, enabling a solution that enhances financial confidence and after taxation support to families that have young children and have lost a parent. It most commonly applies to families who are in need at a time of a crisis. However, it applies differently across Australia due to its interaction with State laws.
Peter Bobbin TEP, Chair of STEP Australia, says: ‘While the law may have represented sound policy when originally passed, with greater mobility, it has become unworkable and out of date. Besides being unfair, it gives rise to confusion, complexity, risk of errors and cost to persons who are grieving.’
In its submission to Deputy Secretary, Revenue Group, Maryanne Mrakovcic, STEP proposes a simple ‘fix’ to the legislation comprising a minor variation to the wording, which would ‘legalise’ a decades-old work-around that has been applied by the Australian Taxation Office (ATO), and restore consistent law across Australia.
Bobbin notes: ‘The post-mortem trust is no substitute for proper and considered estate planning, but when none has been done it should be fair and simple to all Australians’.
To read the STEP Australia submission click here.
CONTACT:
If you would like to discuss any of the above, please contact Peter Bobbin TEP, STEP Australia Chair on +61 2 9895 9370 or David Marks QC, STEP Australia Policy Committee Member on +61 7 3236 5477.
ABOUT STEP:
STEP is the global professional association for practitioners who specialise in family inheritance and succession planning. STEP works to improve public understanding of the issues families face in this area and promotes education and high professional standards among its members. STEP members help families plan for their futures, from drafting wills to issues surrounding international families, protection of the vulnerable, family businesses and philanthropic giving. Full STEP members, known as TEPs, are internationally recognised as experts in their field, with proven qualifications and experience.