The AAT has ruled that amended assessments issued to the father and son beneficiaries of a family trust were excessive. The amended assessments increased the distributions to the beneficiaries in the years in question by reference to the denial of deductions of some $1m for payments made to an employee entitlement fund by a fuel distribution business, which was operated by a unit trust in which the family trust held all the units. The Commissioner increased the distribution on a proportionate basis by reference to the amount of distributions made to the beneficiaries before the Commissioner issued the amended assessments.
However, in finding that the assessments were excessive, the AAT was satisfied that neither of the beneficiaries was presently entitled to receive income from the family trust before the end of the relevant years of income in question because the trustee did not exercise the discretion to pay or apply any income prior to the relevant years of income.
Instead, the AAT found that the default beneficiaries (some 46 beneficiaries, including the father and son) were assessable on the additional trust income in equal shares. In doing so, it dismissed the Commissioner’s argument that there was no express or direct gift in default of appointment in terms of the construction of the trust deed, or that the objects of the default clause were uncertain. Accordingly, the AAT set aside the Commissioner’s objection decision and remitted the matter to the Commissioner for reconsideration.
(AAT Case [2012] AATA 324, Re Hopkins and Anor and FCT, AAT, Ref No 2010/3062, Hack DP, 31 May 2012.)
[LTN 106, 4/6]