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In brief:    The Federal Government in its formal response to the Financial System Inquiry (chaired by David Murray) says that it ‘does not agree with the Inquiry's recommendation to prohibit limited recourse borrowing arrangements by superannuation funds.’ However, it will commission the Council of Financial Regulators and the ATO ‘to monitor leverage and risk in the superannuation system and report back to Government after 3 years.'

More:    So no changes at all are currently proposed to the limited recourse borrowing rules for SMSFs. Coincidentally, in the same week as the Government's response to the Financial System Inquiry, it was reported that ASIC successfully obtained orders in the Supreme Court of New South Wales against a national real estate company held to be wrongly providing financial services. Those services related to recommendations and services about SMSFs provided as part of the company's business of marketing real estate.

In brief:    Despite its sympathy for the taxpayer, the Administrative Appeals Tribunal has held that she was properly assessed on trust income to which she was shown as presently entitled in the relevant tax return of the trust. The entitlement was said to relate to funds accessed by the taxpayer from a trust bank account as part of the normal living arrangements between her and her then partner who was the trustee. The taxpayer had not been aware that those funds constituted assessable income and attempted to disclaim the benefit following her separation from her partner. That disclaimer was held by the Tribunal to be ineffective, since she had already had the benefit of the trust distributions.

More:   A discretionary trust distribution amounts to a gift and no one can be forced to accept a gift. Disclaimer is possible to avoid such a trust distribution but it is legally effective until disclaimer, even if the beneficiary is unaware of it. To be effective, the disclaimer by the beneficiary of a distribution must occur before the beneficiary has received the benefit of it and, in any case, within a reasonable time of the beneficiary becoming aware of the distribution. The Tribunal in this case was critical of the way that the trustee had effectively subjected the taxpayer to a significant tax liability and 75% administrative penalty after cessation of his relationship with the taxpayer. But the Tribunal nevertheless held itself bound to uphold the tax assessed to the taxpayer. (Alderton v C of T [2015] AATA 807)

In brief:    The Commissioner in a recent Taxation Determination changed his view about the assessment of retiring partners. Contrary to a number of private rulings in the past, any entitlement of a retiring partner in the net income of the partnership will be regarded as assessable under s 92 ITAA36. This is said to be the case regardless of how the payment is labelled, whether the partner retires before the end of the year of income and the timing of any payment. In the Commissioner's view, the question is one of characterisation of the payment received by the retiring partner. An amount representing an interest in the partnership net income may also represent the capital proceeds from a CGT event, but any capital gain will typically be reduced to the extent that the amount is assessable under other provisions.

More:    The Commissioner had accepted in a number of past private rulings that s 92 would not apply and that the CGT regime would instead. Given the example included in the Determination, these rulings may have typically applied in relation to larger partnerships. (Taxation Determination TD 2015/19)

In brief:    In a complex case, the trustee of a discretionary trust failed in its attempt to allocate franking credits on a basis quite independent of the proportions in which the franked dividends of the trust were allocated (as part of the distributable trust income). The Federal Court confirmed that a taxpayer's entitlement to a tax offset for franking credits is a function solely of the statutory mechanism. In the case of franked dividends included in the assessable income of a trust, the trust beneficiary's entitlement to franking credits arises according to the beneficiary's share of the franked dividend (s 207-57 ITAA97).

The trustee had previously sought directions from the Queensland Supreme Court in relation to the disputed construction of the trustee's relevant resolutions relating to the distribution of trust income and franking credits. Nevertheless, the Federal Court held that it was obliged to form its own conclusions about the proper construction of the trust deed and the resolutions. And that the orders of the Supreme Court did not bind the Commissioner as to the proper application of the tax law in the circumstances.

More:    This decision illustrates the need to get things right in relation to trust distributions and, in more difficult scenarios, to get expert assistance. The beneficiary in this case had claimed franking credits of over $9M over the several relevant income years at issue, despite being entitled each year to only a minor share of the trust income. Interestingly, although it did not arise on the particular facts involved in this case, the Court expressed the view that franking credits might be properly regarded as a ‘category of income’ capable of being separately recorded in the trust books, if the trust deed was appropriately drafted. (Thomas v FC of T [2015] FCA 968)

In brief:    Legislation has been enacted to formally adopt look-through treatment in relation to SMSF assets held subject to limited recourse borrowing arrangements. This is achieved by effectively ignoring the custodian trust under which such assets are held, treating the SMSF as the owner and the acts of the custodian trustee as those of the SMSF trustee. So income derived from the assets will be taken to be derived by the SMSF and any CGT event will give rise to a capital gain or loss for the SMSF.

More:    This change is welcome, although it really only formalises existing practice. It is a pity that the amending Act did not also formalise the practice for GST purposes, although SMSFs will presumably be reasonably comfortable to continue relying on GST Ruling GSTR 2008/3. Under that Ruling, the Commissioner pragmatically accepts that GST supplies and credits effectively occur for the SMSF rather than the custodian trustee. (Tax and Superannuation Laws Amendment (2015 Measures No 2) Act 2015)

In brief:    A taxpayer has failed in his bid to deduct course fees for an MBA from a prestigious institution in Paris, after having been made redundant from his role in the private equity investments team of a major trading bank. The Commissioner accepted that there was sufficient nexus of the course with his former employment with the bank and had allowed deductions for an initial non-refundable deposit and airfares to Paris, both incurred before the taxpayer's redundancy. But the Tribunal held that there was insufficient evidence to satisfy the taxpayer's obligation to show that the balance of the €48,000 course fees was incurred before the redundancy, which severed the nexus of the MBA course to the derivation of assessable income (the taxpayer did not derive any further employment income for the balance of the income year or the next).

More:    The case was argued by the taxpayer's father, a registered tax agent who had guaranteed payment of his son's MBA fees. The Tribunal held that the evidence was insufficient to satisfy it that the balance of the course fees, unlike the initial non-refundable deposit, was payable irrespective of whether or not the taxpayer proceeded with the course. Nevertheless, although the view formed by the taxpayer's father as to deductibility was incorrect, a 25% administrative penalty for failure to take reasonable care was held to be incorrectly imposed – the taxpayer's father had notes substantiating that he had considered the relevant issues and cases relating to the matter. (Thomas v FC of T [2015] AATA 687)

In brief:    In this case, a husband and wife were the trustees and only members of their SMSF. A civil penalty of $20,000 was imposed on each of them for various breaches of the SIS laws, together with payment of the Commissioner's costs. The breaches included contravention of the sole purpose rule, lending money to members of the Fund, exceeding in-house assets limits and entering into transactions with related parties on more favourable terms and conditions than would be expected if dealing with those parties at arm's length.

Subsequent to the sale of an unsuccessful business, they had started to withdraw funds from their SMSF for ordinary living expenses and to meet repayment commitments relating to debt on their former business. Over a 3 year period, they withdrew virtually all the funds from their SMSF, leaving it with only about $6,000 remaining. The trustees were disqualified from being trustees of a super fund and were subsequently also prosecuted for breaches of the relevant SIS laws.

More:    The penalties in this case were imposed in the context of admission by the trustees of their breaches and their full cooperation with the Commissioner. Nevertheless, there had been prior SIS contraventions, the trustees’ actions were deliberate and they understood that they were contravening the SIS rules. Further, the breaches were serious, with virtually all the assets of the Fund withdrawn. But, having regard to the financial position of the trustees, the Federal Court held that the civil penalties be paid monthly over a 3 year period. (DFC of T v Ryan [2015] FCA 1037) 

In brief:    A university student has failed in an attempt to appeal against summary judgement for PAYG withholding of approximately $3.4M in respect of directors’ penalty notices issued to him by the Commissioner. The attempt failed because the West Australian Court of Appeal refused an extension of time for the taxpayer to file his appeal (which was out of time). Nevertheless, the Court went on to give reasons why it would dismiss the appeal in any case.

The Court agreed with the decision of the Master below who had commented that the lack of detail in the taxpayer’s evidence ‘presumably reflected the appellant's lack of involvement in the day-to-day operations of the company’. The father of the taxpayer was heavily involved in the management of the company and the taxpayer's evidence was that he had had regular discussions with his father about the company's affairs and periodic meetings with the company's financial controller. However, it was held that such evidence fell well short of the taxpayer's obligation to take all reasonable steps to ensure that the company paid its PAYG withholding or to cause the appointment of an administrator or commencement of winding up.

More:    This decision emphasises the dangers in a person accepting appointment as a director when he or she is not actively involved with the company. The judgment in the case does not indicate whether the taxpayer's father was also a director or, in any case, why the taxpayer had been appointed a director. But, whatever the circumstances, the taxpayer paid a very heavy price (including, presumably, the prospect of bankruptcy) for agreeing to act as a director. (Roche v DFC of T [2015] WASCA 196)

In brief:   Arrangements relying on the tax status of limited partnerships at the time have failed in 2 recent Brisbane cases in the AAT, with the same solicitors and counsel acting in both. The cases involved somewhat similar facts and both failed because of the Tribunal's finding that the arrangements in each did not constitute a partnership under the general law. That was said by the Tribunal to be fatal – a corporate limited partnership for income tax purposes (Division 5A of Part III of the 1936 Act) must constitute a partnership under the relevant State partnership Act. And a partnership can only exist if the persons involved are ‘carrying on a business in common with a view of profit’. No business was carried on in either case – income in both was derived from dividends on shares issued in an associated company.

On the basis of the terms of the shares issued in both cases, they were also held to be debt interests under the debt/equity rules (Division 974 of the 1997 Act). Consequently, dividends on those shares were unfrankable (s202-45(d)). And in addition, in one of the cases, Division 7A was held to apply to payments and loans by the associated company involving the purported limited partnership.

More:   Before changes in 2009, most corporate limited partnerships had the advantage that, although effectively taxed as companies, they were not treated in that way for the purposes of Division 7A. But the arrangements in each of these 2 cases failed to achieve the desired status as corporate limited partnerships. According to the AAT's decision, the reason was a failure to appropriately engage the relevant statutory provisions under State law to become limited partnerships. Achieving desired tax outcomes requires an arrangement to have achieved its intended legal consequences to start with – tax laws apply on the basis of the effect of transactions under the general law. Many tax arrangements that fail do so because the intended effect under the general law is not achieved. (D Marks Partnership v C of T [2015] AATA 651 and NR Allsop Holdings Pty Ltd v C of T [2015] AATA 654)

In brief:   The Full High Court, by a 4 to 1 majority, has dismissed the taxpayer's appeal to allow deductions for special fees imposed as part of the arrangements for the taxpayer to acquire part of the Victorian Government's electricity transmission business. The fees were fixed in advance for the relevant 3 1/2 year period after the business was acquired, in order to prevent a windfall from increased tariffs applying after privatisation of the Government's electricity distribution network. Although not part of the stated purchase price, the fees were agreed to by the taxpayer as part of the overall package of transactions for its acquisition of the business. Further, the special fees were not dependent in any way on the extent of usage of the transmission network.

The majority held in the circumstances that the special licence fees constituted part of the cost of acquiring the transmission business and consequently were outgoings of capital. It was accepted that the fact that a promise to pay the fees formed part of the total consideration to acquire the transmission business was not determinative. The critical question is, “what is the character of the advantage sought by the taxpayer?” (or, as expressed in the authority cited by Gageler J, it “depends on what the expenditure is calculated to effect from a practical and business point of view.”)

More:   It is perhaps a little disappointing that the High Court members did not seek to more precisely identify the conceptual basis underlying the revenue/capital dichotomy. In the joint judgement of French CJ, Kiefel and Bell JJ, they lay the blame for the difficulty squarely on the high degree of generality provided by income tax law in relation to the concepts. (Ausnet Transmission Group Pty Ltd V FC of T [2015] HCA 25)

In brief:   In this case, the NSW Court of Appeal refused the taxpayers leave to appeal against the decision that they be grouped for NSW payroll tax purposes. The grounds of the proposed appeal were directed solely to the Chief Commissioner's de-grouping discretion – it was accepted by the taxpayers that they should properly be grouped without the favourable exercise of that discretion.

There were 3 companies involved, owned and controlled by members of the same family. One company carried on a mechanical engineering business and another carried on a civil engineering business. The third company's business solely comprised the provision of contract workers to each of the other 2 companies and it was grouped with each of the other 2 on that basis (and both groups were consequently included in a single larger group, because the third company was a member of each). However, there was evidence that the arrangements between the 3 businesses were undertaken on a commercial basis.

More:   The proposed grounds of appeal were that the Tribunal had erred:

• by not construing the de-grouping discretion as ‘a broad discretion to exclude persons from a group where it is just and reasonable to do so in order to alleviate otherwise harsh consequences’
• because it was obliged to take into account the absence of artificial or contrived arrangements to avoid payroll tax, or of the splitting of existing businesses or other such strategies, and that dealings between the group members were conducted on commercial arm's-length terms
• by failing to have proper regard to the nature and degree of ownership and control of the respective businesses.

The Court of Appeal rejected all these grounds. The case is illustrative of the breadth of the grouping provisions in State payroll tax acts, which do not necessarily rely on elements of avoidance. (Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242)

In brief:   CGT roll-over relief can be obtained on the transfer of a CGT asset to a wholly owned company by an individual or trustee (s122-15) or all the partners in a partnership (s122-125). But, in both cases, the relief is limited to gains from several specified CGT events. In this case, the Federal Court held that the roll-over relief was not available to a couple who created a trust over their land for the benefit of a company wholly owned by them, pursuant to a contract with the company for it to acquire the beneficial ownership of the land. The reason was that CGT event E1 applied (creation of a trust over a CGT asset by declaration or settlement – s104-55) and, even if another CGT event also potentially applied, event E1 was the event most specific to the circumstances of the taxpayers and consequently it was the relevant event to apply (s102-25(1)). And the CGT roll-over relief sought under Division 122 simply did not apply in the case of an E1 event.

More:   So this is a further case where the desired tax outcomes failed because the intended outcome under the general law was not achieved – the case turned on matters of trust law. The critical question was whether the arrangements entered into created a trust over the taxpayers’ land by declaration or settlement, which the Court held to be the case. (Kafataris v DC of T [2015] FCA 874)

In brief:   The corporate taxpayer in this case failed to convince the Full Federal Court that assessments to disallow deductions for contributions to a foreign welfare fund were out of time. The relevant years of income were the 1998 and 1999 years, for which the taxpayer lodged returns and received from the ATO a document entitled "Company/Fund Assessment for ATO use only". Those ATO notices disclosed a taxable income of $0 for each of the years. Following an audit, the Commissioner in 2012 issued notices of "amended assessment" for each of the years to disallow the welfare fund contributions and impose significant shortfall penalties.

The Court in a single, unanimous decision dismissed the taxpayer's appeal. It held that, although each of the 2012 assessments was described as an "amended assessment", in law it was an original assessment. According to the law as it applied in relation to the 1998 and 1999 years of income, there could be no assessment without a positive amount of tax payable (see FC of T v Ryan [2000] HCA 4). Consequently, the original ATO notices were not assessments at all.

More:   The law as it applied in relation to the relevant years involved in this case was changed with effect from the start of the 2005 year. Prior to that time, a ‘nil assessment’ meant that the limitation periods for the amendment of assessments would never apply against the Commissioner and, consequently, a taxpayer in that position faced a risk of the Commissioner raising an assessment on a different basis at any time in the future. The definition of ‘assessment’ now includes the ascertainment that there is no taxable income or no tax payable (s6(1)). (Allan J Heasman Pty Ltd v FC of T [2015] FCAFC 119)

In brief:  Several new measures, mainly from the 2015/16 Federal Budget, passed through Parliament by the close of the winter sittings in late June:

• a reduction of the corporate tax rate from 30% to 28.5% from 1 July 2015, for companies that satisfy the small business entity test (carry on a business and satisfy the $2M aggregated turnover test);
• an increase from $1,000 to $20,000 in the threshold for accelerated depreciation applies from 12 May 2015 up to 30 June 2017 for small business entities;
• primary producers from 12 May 2015 will have immediate deductions for capital expenditure on water facilities and fencing assets, plus a 3 year write off for fodder storage assets; and
• of more limited benefit to SME’s, additional tax concessions have been added to the employee share scheme rules.

In addition, legislation has also been introduced (but not yet passed) to implement the 5% non-refundable tax offset (capped at $1,000) starting from 1 July 2015, for an individual taxpayer's income from an unincorporated small business entity. The same Bill introduces the proposed immediate deduction for business start-up expenses and FBT exemption for multiple portable electronic devices.

More:  The changes provide some welcome benefits to small businesses, starting for the 2015 year of income in the case of the changes to depreciation. The entire balance of a small business depreciation pool may be written off, starting from the 2015 year’s tax return, if the balance of the pool before depreciation for the year falls below $20,000.

Note that the 28.5% corporate tax rate applies only to companies that satisfy the small business entity test – other companies in a family group will still be subject to the 30% rate. Oddly, although perhaps for ease of administration, companies paying the 28.5% rate will still be able to frank dividends as if 30% tax had been paid. Naturally, a company paying the lower tax rate is likely to run short of franking credits if it proposes to distribute all after tax profits, franked to the maximum extent.

Note also that there is no proposed legislation yet for the Budget announcement to provide CGT rollover relief for the restructuring of small business entities into different legal forms. And in any case, that measure is to commence only from 1 July 2016.

In brief:  The Board's post-implementation review has been released, with it concluding that Div 7A is "complex, inflexible and costly to comply with" and in "urgent need for improvements" – this will be no surprise to any tax practitioner advising SMEs! The Board advocates a much more flexible approach for the repayment of loans, with the same treatment afforded to unpaid trust entitlements of corporate beneficiaries.

The ‘Amortisation Model’ model proposed by the Board also has an additional feature to assist trading trusts wanting to retain profits as business working capital. The proposal is that a trust may elect that loans and UPEs owed to corporate beneficiaries will not be subject to Div 7A, although the trust will consequently forgo the general 50% CGT discount on assets other than goodwill and intangibles inherently connected with its business. The idea is that Div 7A would apply to such trusts in a similar way as it applies to trading companies.

More:  The proposal for trading trusts warrants consideration by practitioners in the context of structuring for SME business acquisitions. The Board's proposals to simplify Div 7A are also welcome – the main changes proposed are:

• 10 year repayment terms (except for grandfathering of existing 25 year loans);
• flexible interest and principal repayments, subject to achieving repayment milestones (loan balance not to exceed 75% of original amount at the end of year 3, 55% at the end of year 5, 25% at the end of year 8 and 0% at the end of year 10);
• no formal loan agreement, but some written/electronic evidence required; and
• a higher interest rate (linked to small business overdraft rates), fixed at the start of the loan.

In brief:   In an objectionable move, the ATO has finalised its guidelines about risk assessment as to whether Part IVA might apply to the allocation of profits from a professional firm. They are to apply to situations where practice structures are otherwise effective and income of the firm does not constitute personal services income under Part 2-42 of the 1997 Tax Act. Principals in such firms will be regarded by the ATO as low risk, and consequently unlikely to be subject to ATO compliance review, if they satisfy one of the following benchmarks:

• the remuneration package of the principal is at least as great as the lowest paid member of the upper quartile of professional employees in the firm providing equivalent services;
• the principal is assessed in his or her hands to 50% or more of the income from the firm to which the principal and associated entities are collectively entitled for the year; and
• the effective tax rate on the income of the principal and associated entities is at least 30%.

More:   The ATO has also now revised its view about the potential application of Part IVA to Everett assignments. Such assignments that occur on or after 1 July 2015 will only be considered low risk if one of the 3 benchmarks is satisfied.

Examples to illustrate the ATO's views about the benchmarks are contained in the guidelines situated on the ATO's website – below is a link to the guidelines.

https://www.ato.gov.au/Business/Starting-your-own-business/In-detail/Professional-firms/Assessing-the-risk--allocation-of-profits-within-professional-firms/

In brief:  In an important decision, the Full Federal Court has held that R & D expenditure had not been incurred by the taxpayer to an associated company who managed and funded the R & D, despite monthly invoices being raised for the expenditure and the amounts debited in the books of the taxpayer to a come and go loan account with the associate. The reason was that the parties had agreed that payment of the invoices would be made to the associate by the taxpayer ‘as funds received from investors, loan funds received, and any amounts [the R & D company] may receive from other sources will prudently allow’. The Court held that, irrespective of the way the arrangements were characterised, the obligation for payment was merely contingent and the taxpayer was consequently not definitely committed to the expenditure.

More:  One often hears practitioners talk about some entity invoicing another entity in a particular client group, whether to change tax outcomes or for some other purpose. This case serves as an important reminder that invoices of themselves are insufficient to ground an allowable deduction. What is important is the underlying legal relations and obligations between parties, which may be evidenced (but not created) by invoices. An allowable tax deduction will only be incurred if, according to those underlying legal relations and obligations, the taxpayer is relevantly committed to expenditure. (FC of T v Desalination Technology Pty Ltd [2015] FCAFC 96)

In brief:  A recent Interpretive Decision has expressed the Commissioner's view that breaches of the Superannuation Industry (Supervision) Act 1993 will result from the purchase of a life insurance policy by an SMSF in the circumstances dealt with in the ID. The circumstances postulated are in connection with a buy-sell agreement entered into between 2 brothers who are the only shareholders in a company carrying on a business controlled by the brothers. Under the agreement, the company is to make super contributions to one brother's SMSF, to be used to pay premiums on a life policy held by the trustee of the SMSF on his life. In the event of that member’s death, his spouse will receive the death benefit from the SMSF but his shares in the company are to pass to the deceased's brother for no consideration.

More:  The Commissioner's view is that the sole purpose test is breached because of the significant objects of the arrangement apart from the SMSF trustee simply holding death cover on the life of a member. Because of the sibling relationship in the circumstances considered, the Commissioner also takes the view that there is a breach of s 65(1)(b) of SIS. That provision prohibits the giving of financial assistance using the resources of the fund to a member of the fund or relative of a member of the fund. The Commissioner believes that such prohibited financial assistance will result, given that the aim of the buy-sell agreement is that the SMSF member's brother will obtain complete ownership of the company without cost in the event of the member's death. (ATO ID 2015/10)

In brief:  In a controversial decision, the Administrative Appeals Tribunal has decided that the small business participation percentages in a company were not affected by the existence of an issued share with discretionary dividend entitlements. Consequently, the small business CGT concessions could be applied to the capital gain of nearly $4.4M derived by the company from its sale of shares in another company.

More:  At issue was the effect of the words ‘the percentage of any dividend that the company may pay’ in item 1 of the table in s 152-70(1) of the Income Tax Assessment Act 1997. A commonly held view is that if the whole of a dividend may be declared as payable to the holders of dividend access shares, ordinary shareholders cannot be said to hold any percentage at all of any dividend that the company may pay. The Tribunal took a contrary view, deciding that the holders of ordinary shares in this case had the only rights to dividends until the directors first took the step of resolving that a dividend be paid on the dividend access share. To some extent, the matter is one of construction of the particular company's Constitution against the background of corporations law generally. But if the affect of the company's Constitution is that the directors may declare a dividend on ordinary shares or the dividend access share, to the exclusion of the other class shares in either case, it is difficult to see how the holders of any class have any greater rights than the holders of the other. The Commissioner will undoubtedly appeal against this decision. (Devuba Pty Ltd v C of T [2015] AATA 255)

In brief:  In a recent unreported decision, the Queensland Supreme Court made a freezing order against the trustee of a discretionary trust called The Babes in Paradise Trust, restraining the trustee from disposing of trust assets. The applicant for the freezing order had successfully sued the ‘controller’ of the trust, with damages to be assessed. There was evidence that the controller had dissipated his own assets and that the trustee's brothel business on the Gold Coast was for sale. The applicant claimed that there was a real danger that the proceeds from disposal of that business would also be dissipated and that his judgement for damages, once assessed, would not be satisfied.

So the trustee had no liability itself under the primary action. The applicant for the freezing order nevertheless successfully argued that such an order should be made on the trustee, on the basis that the controller's ‘interest’ in the trust property amounted to property for the purposes of relevant provisions of the Uniform Civil Procedure Rules 1999 (Qld). The order was made on the basis of the control exercised over the trust – the controller was the sole shareholder, director and secretary of the corporate trustee, as well as being the sole appointor and guardian of the trust. The Judge relied on the reasoning of French J (in the Federal Court, before His Honour's appointment as Chief Justice of the High Court) in the Richstar decision (ASIC v Carey (No 6) [2006] FCA 814).

More:  It should be noted that, like Richstar, this case involved an interlocutory type application under specific (subordinate) legislation, rather than a case disposing of the primary legal dispute. And there is much merit in appropriate cases in the status quo being preserved until there can be full argument about primary issues, although one might say that the machinery to achieve that should be made stronger so that judges need not unnecessarily push substantive legal principles. The lengths to which trust control can tend towards the notion of property in the general law has not been authoritatively determined in modern cases and the Richstar decision itself has not been accepted as binding in other contexts.

This case nevertheless represents another warning about some straightforward, though critical, planning points in relation to the control of discretionary trusts. The first is an obvious one. If trust deeds are drafted appropriately, a trust controller is free to relinquish or take steps to reduce the level of control before a dispute reaches such a critical point – there will normally be plenty of time in the lead up to such a point. Secondly, it is essential that trust deeds are drafted so that elements of control through a person's role as a protector/appointor/guardian cease automatically in cases such as the bankruptcy of the controller. And that trust deeds actually deal with the resultant change in control in a considered, thoughtful and practical way. Thirdly, although the law has not developed to the point where this is necessarily advisable in the mainstream and it is most often contrary to the reality of the situation, trusts can be established or altered so that control is less concentrated in one person. (Leach v Ross No 5201 of 2010)