ATO Acknowledges Transparency of Certain Bare Trust Arrangements as Administrative Concession

The ATO has recently taken an administrative position regarding the income tax treatment of certain custodial and nominee arrangements.  The announcement, which is contained in a decision impact statement, refers specifically to trust arrangements commonly recognised as “bare trusts”.

The ATO has stated that such arrangements will be ignored for Australian income tax purposes, thus avoiding the need to lodge trust tax returns and apply the specific trust taxing provisions under tax laws.  The ATO’s position effectively aligns the Australian tax law with industry practice, that is, ignoring such arrangements for tax purposes.

The announcement, although not binding on the ATO, should provide some level of comfort for taxpayers and particularly those businesses that offer nominee, custodial and bare trust services.   However, it is advised that such arrangements be reviewed in light of the relevant fiduciary obligations and the Australian trust tax law provisions.