Taxation Assignment: Capital Gains Tax and Trust Structures Analysis

This assignment addresses the taxation of trusts, specifically focusing on capital gains tax (CGT) implications. The scenario involves Rob and Jane establishing a trust for their sons, with Rob acting as trustee. The assignment explains that setting up the trust results in a CGT event under section 104-55, making the trustee responsible for tax affairs, including filing tax returns and paying tax. The capital gains or losses derived from the CGT event are considered when calculating the trustee's net capital gains or losses. According to the Income Tax Assessment Act 1936, capital gains are included in the net income of the trust and are subject to tax compliance. Therefore, any capital gains derived by Rob from the trust will be included in his net earnings for tax purposes. The assignment references relevant taxation laws and rulings to support its analysis.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to question C:................................................................................................................2
Reference List:...........................................................................................................................4

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Answer to question C:
A trustee is usually held lawfully accountable for the functioning of trust. The trustee
can be either an individual or company and the profits derived from the trust usually goes to
the beneficiaries. The taxation ruling of TR 2006/14 states down the consequences of
granting the life span right of dwelling in the property (Cao et al., 2015). The ruling also
provides the capital gains tax consequences that is associated at the time of creating the life
time and remaining trust interest in the property. As it has been observed from the current
situation of Rob and Jane with the remaining amount of money from the sale of partnership
business they plan to set up the trust for their two sons with Rob acting as the trustee of the
trust. It is worth mentioning that the consequences of capital gains tax are usually different
from the equal life and that of the lawful life in the property.
The legal ownership of the trust asset that is held for beneficial life interest along with
the legal person acting as the representative of the deceased estate where the estate of the
deceased is necessary held on trust for the purpose of giving life time benefit and the
remainder owners (Braithwaite, 2017). If the trust is set up over the actual asset with the help
of medium declaration and at the time of reaching settlement it results in CGT event under
section 104-55.
In the existing scenario of Rob and Jane the setting up of trust results in CGT event
under section 104-55 and trustee are generally held accountable for the administration of the
tax affairs relating to trust (Snape & De Souza, 2016). The trustee is also responsible for
management and filing of tax returns together with the payment of tax. The trustee in the
current scenario Rob can make capital gains and losses derived from the CGT event resulting
from the original asset after the trust is set up and is held under the trust for life interest for

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their two sons. Any kind of capital gains or losses that is made from the trust by the trustee
shall be considered while working out the net capital gains or loss of the trustee.
In accordance with the subsection 95 (1) of the Income Tax Assessment Act 1936
capital gains will be subjected to inclusion in the net income of the trust. The capital gains are
subjected tax compliance in agreement with subdivision of 115-C (Barkoczy, 2016). In
agreement with the present context of Rob being the trustee of the trust set up by him for his
sons the capital gains derived by him shall be subjected to included in the net earnings of
Rob. In agreement with the sub-section (95) of the Income Tax Assessment Act 1936 the net
income derived by the trustee from the trust shall be taken into the consideration for the
purpose of tax under subsection of 115-C.

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Reference List:
Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Braithwaite, V. (Ed.). (2017). Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., ... & Wende, S.
(2015). Understanding the economy-wide efficiency and incidence of major
Australian taxes. Treasury WP, 1.
Snape, J., & De Souza, J. (2016). Environmental taxation law: policy, contexts and practice.
Routledge.