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    Saturday 17 August 2019

    Australia’s Penal Taxation of Foreign Trusts

    Managing director as representative

    Under Australian tax law, if a foreign trust accumulates foreign income and capital gains; and later distributes that income to an Australian tax resident beneficiary, in most cases, the beneficiary is taxed the distribution. The taxable amount is reduced by the original settlement into the trust and other exceptions exist.

    Often excessive tax is payable (at 47%) by the beneficiary as a result of the above, particularly if the income or capital gains accrued within the trust at a time when the beneficiary was not an Australian tax resident or have already been taxed overseas.

    Also, a foreign trust will be an Australian tax resident trust if at anytime during an Australian tax year (to 30 June) one or more of the trustees of the foreign trust is an Australian tax resident.

    Trustees and/or beneficiaries planning to relocate to Australia should seek Australian tax advice prior to the 30 June, in advance of the year of relocation.

    For more information, please contact:

    Author:
    Naomi Smith
    Nexia Canberra

    T: +61 2 6279 5400.

    E: nsmith@nexiacanberra.com.au

    Under Australian tax law, if a foreign trust accumulates foreign income and capital gains; and later distributes that income to an Australian tax resident beneficiary, in most cases, the beneficiary is taxed the distribution. The taxable amount is reduced by the original settlement into the trust and other exceptions exist.
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