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Disclaimer by a discretionary trust beneficiary retrospectively avoided payroll tax grouping
In brief: The New South Wales Supreme Court has held that a disclaimer of his interest as a discretionary trust object was valid to retrospectively end a person’s rights to benefit from the time those rights were created. This was sufficient to break the payroll tax grouping between several entities controlled by 2 brothers, the group determined by the Chief Commissioner having included a company in liquidation with substantial outstanding payroll tax assessments.
More: This case is another that confirms the enthusiasm by State payroll tax authorities for the grouping of entities. Grouping is a very useful mechanism for those authorities since each member of a group is jointly and severally liable for the payroll tax liabilities of all group members. And discretionary trust objects are typically deemed to have more than a 50% interest, readily enabling grouping through broad beneficiary classes in discretionary trusts. That is the real issue – having extraordinarily wide beneficiary classes is an outdated practice that creates problems, rather than serving any useful purpose. And that is why Tax Strategies’ trusts are created quite differently and will not facilitate payroll tax grouping through such tenuous connections. (Smeaton Grange Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW) [2016] NSWSC 1594)
15 Dec 2016
Topic: State Taxes/Trusts
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