Is Labor’s Trust Tax Relevant to SMSFs?
There’s been some media coverage in recent days about the effect that Labor’s tax proposal for discretionary trusts will have on SMSFs given that “SMSFs are commonly invested in discretionary trusts”. This surprised me as SMSFs never invest in discretionary trusts. They only invest in fixed, or unit, trusts and these aren’t included in Labor’s proposal. Even a distribution from a discretionary trust to an SMSF is regarded as NALI, and treated accordingly, so that doesn’t happen either.
It seems that the reporting was a little incomplete. Managed Funds are common SMSF investments. These are regarded and treated, even by the ATO, as fixed trusts however it may be that their trust deeds do not make this sufficiently clear. Where this is the case, a strict interpretation of the law might cause them to be redesignated as discretionary trusts. Labor’s proposal does not seem to envisage this situation however it would be prudent for managed funds to check their deeds.