No conclusions reached. Obviously the PSI rules need to be investigated.

Terry, sorry I dont know what are the PSI rules?

http://www.ato.gov.au/content/37495.htm

General principles

• Arrangements where personal services income is alienated (for example, because your personal services are contracted through your company, trust or partnership) and taxed at a lower rate than if you had received the income yourself may attract Part IVA, particularly where your remuneration is less than commensurate with the value of your services. This means that the income may be assessed to you rather than to the entity. This will depend on your circumstances and each case must be decided on its own merits.
   
• If you split personal services income with an associated person, or with another entity associated with you, then Part IVA may apply to that arrangement. However, you can pay remuneration (for example, salary or wages) to an associate (or a service trust) for bona fide services related to the earning of your personal services income if that amount is reasonable for the services provided by them.³ In supporting the claim it would be advisable to have details of the dollar value of the hourly rate of pay and the number of hours being paid (recorded by for example time sheets, diary records or the like) and of the duties involved and how they relate to the work being undertaken by the principal.
   
• In particular if you use a family trust or company to split personal services income with an associate (say a family member) and thereby reduce your income tax liability, then Part IVA may apply to that arrangement. For example, Part IVA may apply where a salary is paid to you as the principal worker by your trust or company and that salary is not commensurate with the value of your services⁴, and the remaining income is distributed to associates. In most cases, a salary commensurate with your duties and responsibilities will be the gross amount received by your trust or company less allowable deductions (other than deductions associated with income splitting).

Even if you have to provide your services through an interposed entity in order to obtain the relevant service contract Part IVA may still apply if you use that entity to split your income or retain profits.

What can I do to ensure the general anti-avoidance provisions do not apply?

Notwithstanding these general principles, the application of Part IVA requires a conclusion in the particular case that the dominant purpose of the relevant arrangement was to obtain a tax benefit.

It is not therefore possible to give certainty as to the application of Part IVA in the absence of each factual situation being examined.

You can obtain certainty for your individual circumstances by applying for a private binding ruling. Alternatively taking the following steps will avoid the potential operation of Part IVA.

If you are operating through a company

If you operate through your company and there is no income splitting and no retention of profits in the company (for example, if the only advantage for income tax purposes is access to greater superannuation benefits) then Part IVA will not apply.⁵

If a bona fide attempt is made to break even, a relatively small amount of taxable income may be returned by the company provided that income is distributed to you by way of a franked dividend in the following year.⁶

If you are operating through a trust

If you operate through your trust with a corporate trustee the position is the same as for companies.⁷

You should receive income from the trust in relation to the personal services income that is commensurate with your duties and responsibilities, or be the sole beneficiary of the trust in relation to that income.⁸

If you are operating through a partnership

If you are in business and you conduct that business with your spouse through a genuine partnership then this will be accepted for income tax purposes.⁹

Where the partnership income results from the personal services of one or more of the partners (not from the services of employees or the use of income-producing assets) and where there is splitting of that personal services income which reduces the amount of income tax which might otherwise be payable, then Part IVA may apply to this arrangement.¹⁰

How will the Tax Office apply the views contained in this fact sheet?

This fact sheet restates our views on when Part IVA may apply to personal services income cases.

We accept others may disagree with these views and that concepts of employment, business and entrepreneurship have progressed since the cases from which our views were formed were heard. We are looking to identify test cases to obtain further judicial guidance as to the correctness of our views. We are doing so in consultation with tax professional bodies.

While these views are being tested in the courts we will not be running a specific audit program in this area other than to support the test case program. However, cases arising from our ongoing audit operations will, as is currently the case, be progressed as necessary.

Well it seems legit. I mean if it is "our" income and my income is low and I know there are certain laws that allow you to funnel atleast part of your partners income through a trust. Perhaps the laws changed but I have heard this type of stuff being done in the past. But perhaps not anymore…

Cheers

I beleive the most precious thing in the universe is not the love between husband and wife (Often termed reciprical, and short lived), but the love between parent and child (Unconditional and on-going). I think family structures should focus on the relationship of greatest importance as being this relationship over all others. Typically in our culture we dont, we tend to have this ideology mindset that the relationship
of greatest importance is husband and wife.

"A trustee just manages the trust (investment decisions, regulation, etc) following within the guidelines of the trust, the appointor just appoints them. The assets are owned by the trust and the trust has beneficiaries.
If your father was sole beneficiary then it could be argued that they are his assets. If it is seen that a trust has been setup for the purpose of transferring assets from the marriage, i.e. swindling his wife, then I believe it would be challenged successfully that the assets should be considered as property of the marriage".

An appointer can, for example, be given (from family trusts by N.E Renton)

A power of veto over certain types of transactions

A power of veto over proposed ammendments to the trust deed

A power to remove or appoint trustee

A right to be consulted in relation to certain investments

A power to act as arbitator or mediator in the event of certain disputes

A power to nominate a sucessor or appointer to itself

So if I can convince my grandfather to make my father appoiner to be then once this occurs my father
will be able to nominate me as appointer to be. Once I am appoiner I may employ someone I trust to become trustee.
Then together we manage the distrubutions to the beneficiaries including myself, perhaps the trustee and the wife.
If the trustee dishounurs me for example I may fire it and employ a new one. So in a nutshell the appoiner is the best
position to be in when you are trying to be in control of a trust. 

As terry mentioned before sometimes someone hostile may become appointer (such as a lawyer or accountant) at which point family assets can sometimes be distributed to people outside the family once the apprpriate trustee is found and employed by the appointer.  

Were in the process of creating binding financhial agrements for the superannuation funds. Also yes they need to be updated every three years and I will be keeping ontop of that.

"Your dad can't give away his wifes share of the assets in his will only his share"

My understanding is that if assets are held by a trust then they are owned by
a separate entity to the marriage itself. Members (i.e husband and wife and any children) may become beneficiaries of the trust but do not own
the assets occording to law. The trust is under the control of people such as the appointer and trustee according to the directions as specified on the trust deed.

Also I would like you to find me something that says he cant give me any specified portion of the wealth if he so pleases. As long as that is what he specifies in the will, then that is what the executor is supposed to authorise.
The wife may oppose and she may be able to apply to the courts for a greater portion, but she is not entitled to 50% by defult if the will specifies an alternative.
We had a prenuptial aggrement organised on the day of the wedding which specifies in the event of divorce the new wife leaves with exactly what she entered in the marriage with. If my father receives an inheritance passed down via a trust it is not actually his wealth occording to law. It is the wealth owned by the trustee of the trust. In which case the members of the trust control it and its distributions to the relevant beneficiaries (could include the wife). If they have more children well then we will have to take that as it comes. Perhaps any new child/ren would become part of the future trust structure and be beneficiaries.

Terryw. do you know if there is any binding financhial terms that exist in terms of wills and assets held outside of a trust ? or is a request in a will equivalent to a binding nomination?

Also If anything im saying you think is incorrect please let me know!   

Terryw,

"But it wouldn't count as child support and the child would only be able to get $416 pa trust free"

You mean to say "Tax free" right?

Okay, well I think when my father writes the will I will be asking him to make me the executor. However, if down the track we decide to also create a trust of our own, (separate from my granparents), then may I also be named appointer to be in the event of my fathers death. I mean to say, could I be the executor of a will, a beneficiary and an appointer?

I know ideally the whole family should operate under one trust, its just that I dont think my granparents are interested at this point in including any of us as part of their own trust as they seem to think the trust should only include two people. (i.e husband and wife).