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PRODUCT INFORMATION

BAMFORD TRUST DEED AMENDMENT

If you want to stream income and capital from your Unit, Discretionary or Hybrid Trust, your trust deed must have the appropriate Bamford income streaming provisions. As many trust deeds do not contain these provisions, this means that in order to stream income or capital from your trust, you may need to update your trust deed to include these provisions.

Amending a Unit, Discretionary or Hybrid trust deed in an inappropriate manner can have serious implications for the Trust. Any amendments should be overseen by an expert in this field which is why Topdocs works with in-house lawyers from Topdocs Legal Pty Ltd to prepare income streaming trust amendments.

Topdocs' Bamford (income streaming) trust deed amendments are individually tailored. Our specialist Trust solicitors individually review the current terms of the trust deed thoroughly before preparing your income streaming amendment. We then amend the terms of the trust deed in a manner that is consistent with the existing provisions and terminology of the Trust. This ensures your amendment does not create any conflicting provisions in the trust deed.

download Review the Bamford Trust Deed Amendments order checklist download See the list of documents you will receive

TOPDOCS BAMFORD (INCOME STREAMING) PROVISIONS

The specific provisions in our income streaming amendments include ... [more]

  • Ensuring the trust deed has a definition of trust income that allows the inclusion of capital gains and also ensures the trustee has the discretion to adopt a different concept of income to provide maximum flexibility.
  • Ensuring the income definition may exclude “notional amounts” such as franking credits, as the Commission has stated in the decision impact statement of Clark’s case that a beneficiary cannot be presently entitled to notional amounts.
  • Inserting provisions to give the trustee discretion to apply outgoings against income or capital and make distributions out of gross income (which may allow distributions out of gross income to preserve franking credits etc).
  • Ensuring flexibility to allow a trustee to resolve to distribute income or determine what concept of income applies after 30 June in any year, should the law change. The Commissioner has indicated that, where the deed stipulates that income distributions must be made by 30 June, he will insist on strict compliance.
  • Including adequate “attribution” provisions to ensure receipts and outgoings retain their character in order to pass on the benefits to the beneficiaries/unit-holders with any special entitlement

USE OUR DEED UPDATE SPREADSHEET FOR BULK ORDERS

If you are planning on ordering a number of income streaming amendments, you can use our deed update spreadsheet to easily record the details of each trust.

download Download the Income Streaming Trust Deed Amendment Spreadsheet

MORE INFORMATION

You can learn more about the Topdocs Bamford Trust Deed Amendments documentation in the RELATED INFORMATION tab.

Should you have any queries or require more information, please call the team at Topdocs on 1300 659 242.

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  • your document is professionally printed and bound, reviewed by our legal team where required, then delivered to you by express post

Should you have any queries or require more information, please call the team at Topdocs on 1300 659 242.

RELATED INFORMATION

MORE INFORMATION

Outlined below is additional information relating to the document you have chosen.

Topdocs Trust Amendment services ... [more]

Topdocs offers the following Trust Amendment Services:

  • Tailored Trust Deed amendments to cater for updated income streaming provisions (also known as Bamford amendments because of the recent FCT v Bamford & Ors, Bamford & Anor v FCT [2010] HCA 10 (Bamford) High Court case);
  • Trustee and Appointor changes;
  • Unit transfers, allotments and sales.

Topdocs Discretionary and Unit Trust updates (Bamford updates) ... [more]

Background to the Bamford case

The ATO previously considered that the "income of the trust estate" referred to ordinary income derived in the hands of the trustee, and that neither the provisions of a trust deed nor a determination by a trustee acting under authority of a trust deed could alter the character of receipts or outgoings in the hands of the trustee.

However, in FCT v Bamford & Ors, Bamford & Anor v FCT [2010] HCA 10 (Bamford) the High Court held that a trustee resolution, made pursuant to a power in the trust instrument, to treat a capital receipt as income was effective in treating the capital receipt as part of the "income of the trust estate" for the purposes of section 97 of the Income Tax Assessment Act 1936 (ITAA 1936).

The decision relates to sections 95 and 97 ITAA 1936. Section 95 of the ITAA 1936 defines the concept of "net income" of a trust estate as assessable income, less allowable deductions, of the trust estate in respect of a year of income. Thus, net income is similar to the concept of taxable income.

Then there is the concept of "present entitlement", where section 97 of the ITAA 1936 provides that a beneficiary of a trust estate, who is not under any legal disability, is presently entitled to a share of the income of the trust estate so long as the assessable income of the beneficiary includes that share of the net income of the trust estate.

The Bamford decision of the High Court supports the view that:

    • the income of the trust is whatever the trust deed determines it to be. So trustee(s) and their advisors need to be aware of which definition (if any) the trust deed contains, and whether the trustee has the power to adopt a different definition in respect of a particular year of income; and

    • if the beneficiaries of the relevant trust are made presently entitled to a 100% share of the "income" of the trust, then they will be required to include in their assessable income, 100% of their share of the taxable income of the trust.

ATO Decision Impact Statement

As a result of the High Court decision Tax Office has released a Decision Impact Statement and Practice Statement (PS LA 2010/1) on 2 June 2010. These deal with the ATO’s interpretation of the decision and how the ATO will apply the decision.

This Decision Impact Statement sets out a number of general propositions, as understood by the Tax Office, which have emerged from the High Court's decision. It covers the Tax Office's administrative treatment of tax returns for the 2009/10 and earlier income years. It also identifies a number of issues in relation to tax laws dealing with trust income which the Tax Office considers to remain unresolved.

Trust reviews following Bamford

In order to benefit from the outcomes of the Bamford case, trustees and their advisors need to be aware of the definitions that their trust deeds contain. Many older trust deeds do not have the necessary provisions to enable them to take advantage of the Bamford principles.

As a result, it is now timely to consider the review of your trust deeds, to ensure that they effectively define "net income" of the trust and provide the ability to redefine capital gains as "income of the trust estate".

The Topdocs Trust review service ... [more]

Topdocs, in conjunction with Topdocs Legal Pty Ltd, provides a trust deed review service with amendments if necessary to:

  • ensure the Current Trust Deed has a definition of trust income that allows the inclusion of capital gains and also ensure the trustee has the discretion to adopt a different concept of income to provide maximum flexibility;
  • ensure the income definition of trust income may exclude ‘notional amounts’ such as franking credits as it is not possible for a beneficiary to be presently entitled to these and the ability for the trustee to make distributions out of gross income (to preserve franking credits etc);
  • include an adequate "attribution" provision to give the trustee a discretion to categorise receipts as income or capital and apply expenses and outgoings against income or capital and to distribute these categories to beneficiaries in disproportionate shares; and
  • allow flexibility in the requirement stipulated by the Commissioner in Tax Ruling 2012/D1 that the trustee must resolve to distribute income or determine what concept of income applies to the Trust by 30 June in any year, should proposed legislation be introduced otherwise.

Should you have any queries or require further information, please call the team at Topdocs on 1300 659 242.