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Brycol(Newbie)Newbie
4 Dec 2023

My father passed away 10 years ago and setup a trust (in South Africa) to pay for kids' well-being in Australia. Various taxes were paid in SA when the funds were distributed and the trust established.


There have been payments for school fees etc. to the kids, and we now wish to wind the trust up.


The provision in the trust states that if it is wound up, it should be paid to me (father), and my intent would be to pass it on to my kids.


Would my assumption that this is not taxable, and would not need to be declared by me as income in Australia? When I pass the funds to the children, is there anything that would need to be declared there too?

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946 views
3 replies

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Most helpful reply

AriATO(Community Support)Community Support
13 Dec 2023

Hi @Brycol,

 

Thanks for your patience while we checked this out.


Distributions from and winding up of a foreign testamentary trust is a complex issue requiring further info.

 

A testamentary trust functions in a similar way to a discretionary family trust. In general, beneficiaries are assessed based on their share of the trust’s income. As explained in our web guidance - if you receive money from a foreign trust, the amount may need to be included in your assessable income. However, if the foreign trust distribution is subject to tax overseas and in Australia, you may be able to claim a foreign income tax offset. There may also be tax treaties to consider. Consequently, further information is needed to advise whether the distributions are assessable to you in Australia.

 

When you pass the funds to the children, if they are gifts, they are generally not taxable. However, further information is needed to correctly characterise the funds in the hands of the children.

 

For more information on how the distributions should be taxed in your circumstances, we recommend contacting tailored technical assistance.

All replies

Most helpful reply

AriATO(Community Support)Community Support
13 Dec 2023

Hi @Brycol,

 

Thanks for your patience while we checked this out.


Distributions from and winding up of a foreign testamentary trust is a complex issue requiring further info.

 

A testamentary trust functions in a similar way to a discretionary family trust. In general, beneficiaries are assessed based on their share of the trust’s income. As explained in our web guidance - if you receive money from a foreign trust, the amount may need to be included in your assessable income. However, if the foreign trust distribution is subject to tax overseas and in Australia, you may be able to claim a foreign income tax offset. There may also be tax treaties to consider. Consequently, further information is needed to advise whether the distributions are assessable to you in Australia.

 

When you pass the funds to the children, if they are gifts, they are generally not taxable. However, further information is needed to correctly characterise the funds in the hands of the children.

 

For more information on how the distributions should be taxed in your circumstances, we recommend contacting tailored technical assistance.

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