Hybrid Trust Solutions

The Commissioner’s concerns

The Commissioner of Taxation has issued Taxpayers Alert TA 2008/3, to voice several concerns he has in relation to certain features of some Hybrid Discretionary Trusts. The particular features which the ATO appears to have the most difficulty include:

an ability to defeat a unitholder's entitlement to receive distributions of fixed proportions of trust income and capital gains
a unitholder not being entitled to receive distributions of trust capital gains at all
interests or entitlements being conferred upon associates of a unitholder for less-than-market-value consideration
a unitholders entitlement to receive distributions of the trust ordinary income being less than what it should be, meaning that they've borrowed to fund income to which other beneficiaries are entitled
a unitholder only being entitled to receive distributions of the trust capital gains
a unitholder's interest in the trust ending before the cost of their investment has been recouped
a unitholder redeeming their units at their purchase price or less than market-value; and units being purchased at an amount less than their market-value.

Downloadable Documents

Hybrid Discretionary Trusts-What the ATO will accept

MGS EM-Hybrid Discretionary Trusts

MGS Hybrid Discretionary Trust Solution

MGS Hybrid Discretionary Trust Private Binding Ruling

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MGS HDT Client Letter

Updating Your Hybrid Discretionary Trust

Why use Macquarie Group Services to upgrade your clients' hybrid discretionary trust?

MGS has been in communication with the ATO for years concerning hybrid trusts,
MGS has been working with the ATO to work out an acceptable form of deed that would entitle the Special Income Unitholders to a full deduction,
MGS knows what the ATO will allow and how to amend deeds without causing a resettlement,
MGS knows what issues concern the ATO that aren't in the amendment.

What's included in the MGS Hybrid Discretionary Trust Amendment Kit?

Deed of Variation,
A full copy of the Private Binding Ruling issued to Christopher Batten,
A copy of the Reasons for Decision issued to Christopher Batten,
An outline of the history of hybrid discretionary trusts,
A guide to what the amendments mean,
A guide to using the trust after the amendment.

I have an MGS Hybrid Trust - What should I do?

If you established the MGS Hybrid Discretionary Trusts prior to 2011 then you should have the deed amended so that it is in line with what is accepted by the ATO. Some features which formed part of the deed to which the ruling relates were only settled in 2011.

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MGS HDT Client Letter

Updating Your Hybrid Discretionary Trust

I have a Property Investor Trust - What should I do?

The Property Investor Trust is a particular hybrid discretionary trust developed by Chan & Naylor. Many of the clauses and features would not be acceptable to the ATO and therefore a full deduction in relation to any borrowing would be at risk. Contact MGS for an amendment to bring the deed in line with what is accepted by the ATO.

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MGS HDT Client Letter

Updating Your Hybrid Discretionary Trust

I have another hybrid discretionary trust - What should I do?

The hybrid discretionary trust you have established should be checked and if necessary, amended to bring it in line with what is acceptable to the ATO. The trust deed, application for units and unit certificates should be reviewed and where necessary amended.

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MGS HDT Client Letter

Updating Your Hybrid Discretionary Trust

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To order a Hybrid Discretionary Trust or any of our other products and service, please create or sign in to your Macquarie Group Services account here.

Email us your deed and have it checked to see if it is ATO compliant

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