Trust beneficiaries: amended assessments were excessive

The Administrative Appeals Tribunal (AAT) has found that amended assessments issued to the father and son beneficiaries of a family trust were excessive. The Commissioner’s amended assessments increased the distributions to the beneficiaries in the years in question by reference to the denial of deductions of some $1 million for payments made to an employee entitlement fund by a fuel distribution business that was operated by a unit trust in which the family trust held all the units. The Commissioner increased the distributions 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 income years in question because the trustee did not exercise the discretion to pay or apply any income prior to the end of 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 reaching this finding, the AAT dismissed the Commissioner’s argument that, under the trust deed, there was no express or direct gift in default of appointment, 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.

Re Hopkins and FCT [2012] AATA 324, www.austlii.edu.au/au/cases/cth/AATA/2012/324.html