12 October 2018
Media Release - #2018012, 2018

Extending anti-avoidance rules for circular trust distributions: exposure draft legislation released

The Government today released for public consultation draft legislation that extends to family trusts a specific anti-avoidance rule that applies to other closely held trusts that engage in circular trust distributions.

Currently, where family trusts act as beneficiaries of each other in a ‘round robin’ arrangement, a distribution can be ultimately returned to the original trustee in a way that avoids any tax being paid on that amount.

These amendments will better enable the ATO to pursue family trusts that engage in these arrangements by extending the specific anti-avoidance rule, imposing tax on such distributions at a rate equal to the top personal tax rate plus the Medicare levy.

This measure was announced in the 2018-19 Budget and applies from 1 July 2019.

The exposure draft legislation and explanatory materials are available on the Treasury website.

Interested stakeholders are encouraged to provide their views by Wednesday, 31 October 2018.

Submissions can be emailed to circulartrusts@treasury.gov.au during the consultation period.