• Service: Tax, Superannuation & Pension Funds
  • Industry: Financial Services, Investment Management, Insurance, Superannuation
  • Type: Business and industry issue, Regulatory update
  • Date: 1/05/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Peter Oliver

Peter Oliver
Partner, Tax

+61 2 9455 9520

Changes to tax-preferred trust distributions? 

by Peter Oliver, Financial Services Specialist

Senior representatives of the ATO have recently verbally stated that distributions of tax deferred and CGT concession amounts by unit trusts may be assessable as ordinary income to certain unit holders, including:
  • revenue account unit holders (e.g. general and life insurers)
  • unit holders that receive deemed capital treatment for assets (e.g. superannuation funds and managed investment trusts with capital elections).

This radically extends the ATO’s published views in IT 2512 and ATO ID 2011/58.   ATO representatives have verbally advised that they are scoping a public ruling (it will be interesting to see whether this is only administered prospectively).


To treat such tax preferred amounts as assessable to unit holders contradicts:

  • established case law on trust character retention (and the principle of specific over general provisions)
  • legislative policy, e.g. deemed CGT treatment for most superannuation assets and CGT Event E4
  • ATO administrative practice as widely understood.


The apparent ATO view could distort future investment decisions due to different (double) taxation outcomes for indirect vs direct investment.  It will also create uncertainty for:

  • trustees (e.g. unit values and distribution resolutions)
  • unit holders (are retrospective amendments needed to reduce historic capital gains on disposal of units?).


If the ATO pursues this view, investors of the above types should be prepared to consider both prior and current income years to determine the impacts and their available actions.


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