This summary provides an overview of the key points related to tax planning and group tax summaries, including legal considerations and best practices for trustees.

• This presentation focuses on tax planning basics and the importance of understanding the "big picture" when managing group tax summaries.
• Effective tax planning is essential to minimize tax liability while staying compliant with tax laws.

• A group tax summary provides an overview of the tax position for all entities within a client group.

• It consolidates tax reconciliations from individual entities to calculate the effective tax rate:

  • Effective Tax Rate = Total Tax Liability ÷ Total Taxable Income.

• The group tax summary is useful for discussions with clients during tax return preparation and tax planning.

• Tax Planning involves structuring financial affairs to minimize tax while complying with the law.
• Tax planning is legal when it aligns with the intent of the law, but tax avoidance schemes (designed purely to exploit the tax system) are unlawful.

• Part IVA of the Income Tax Assessment Act 1936 focuses on schemes with the dominant purpose of obtaining a tax benefit.
• The ATO considers several factors, including how the scheme was carried out and its financial impact on the taxpayer and related parties.

• To effectively plan for tax, it is essential to understand the client's personal circumstances, such as:

  • Estimated income and deductions.
  • Investments, business profits, rental income.
  • Major life changes (e.g., marriage, retirement).
  • Any planned acquisitions or sales, particularly for capital gains tax (CGT) purposes.

• Distribution Resolutions: Trustees of discretionary trusts need to make resolutions regarding the distribution of income to beneficiaries by the end of the financial year (usually June 30).

• Ensure the trustee has considered all factors, such as trust deed provisions, eligibility of beneficiaries, and any family trust elections.
• Resolutions should clearly outline the beneficiaries' entitlements, and any tax implications (e.g., CGT and dividend streaming) should be carefully considered.

• Distributing income solely for tax savings can be a red flag for the ATO.
• It's essential to check that the trust deed supports the decisions and that resolutions are made in good faith, with all beneficiaries' interests considered.

• Avoid "rolling forward" previous year's resolutions without reviewing the specific details and current year's financial circumstances.

• Tax planning is a continuous process that requires attention to detail and a comprehensive understanding of the client's financial situation.
• Building relationships with clients and asking the right questions is key to effective tax planning and compliance.