Friday 04 October 2019

The Government has released exposure draft legislation for consultation, to implement integrity measures announced in the 2018-19 Budget to improve the taxation of testamentary trusts.

Currently, income receive by minors from testamentary trusts is taxed at normal adult rates rather than the higher tax rates that generally apply to minors. However, some taxpayers are able to inappropriately obtain the benefit of this lower tax rate by injecting assets unrelated to the deceased estate into the testamentary trust.

The draft legislation clarifies that minors will only be taxed at adult marginal tax rates in respect of income a testamentary trust generates from assets of the deceased estate, or the proceeds from the disposal of these assets. This change will apply from 1 July 2019.

The consultation period begins 3 October 2019 and ends 30 October 2019.

Further information

The Treasury, Treasury Laws Amendment (Measures for Consultation) Bill 2019: testamentary trusts - exposure draft and explanatory materials, 3 October 2019

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