Tax Alert - Section 100A guidance now finalised

Lowe Lippmann Chartered Accountants

ATO Guidance targeting trust reimbursement agreements now finalised


The Australian Taxation Office (ATO) has recently finalised its guidance in relation to trust distributions and “reimbursement agreements”. This guidance impacts all clients with family or discretionary trusts.


The final guidance contained within Taxation Ruling TR 2022/4 Income tax: Section 100A reimbursement agreements and Practical Compliance Guideline PCG 2022/2 Section 100A reimbursement agreements – ATO compliance approach has been developed to support trustees and their advisors, who have been requesting clearer guidance to help them manage their tax obligations.


The ATO guidance has been finalised following an extended consultation period with the tax community, and recommended changes have been incorporated based on this feedback.


The ATO focus surrounding Section 100A relates to trust distributions made to beneficiaries, in order to achieve a tax advantage where the funds relating to the distributions are not paid out to a beneficiary, or are in some way reimbursed back to the trustee or other parties.


Whilst these final documents do not significantly depart from the draft versions released in March 2022, which gave rise to much debate on the ATO’s renewed focus on trust arrangements (see our previous Tax Alert here), there are some notable changes (see below) and they do provide additional examples which provide further clarity for trustees and advisers as to what trust arrangements the ATO will focus their attention on.


What are the notable changes?


The finalised guidance includes a few changes to the previous draft documents, including the abolition of the “blue zone”, an expansion of “green zone scenarios” concerning distributions, in particular providing a two-year timeframe to pay distributions and the broadening of individuals/entities to whom distributions can be made with less stringent requirements to pay.


However, it is unfortunate that the final guidance still applies retrospectively to trust entitlements that arose prior to 1 July 2022 in certain circumstances.


We note that the ATO has confirmed it will not allocate any compliance resources to review any trust arrangements entered into before 1 July 2014 which are considered to be “low risk”.



What are the next steps?


Given the potential retrospective nature of this ruling, reviews of previous income years distributions may be necessary.  Furthermore, careful consideration of the appointment of trust income for the year ending 30 June 2023 and beyond will need to be adopted.


Lowe Lippmann intends to provide further guidance on managing trust distributions by explaining the most salient issues in the new year once the full implications of these changes are fully considered.


Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.


August 12, 2025
What are contract assets and contract liabilities that arise under the revenue accounting standards? Deferred revenue, accrued revenue, revenue received in advance, contract assets, contract costs asset, contract liabilities and receivables are all line items we see in the balance sheet in relation to revenue. It can be confusing to understand what these terms mean and whether different words are being used for the same thing.  We have provided a guidance to these and similar terms to enable you to use them confidently and understand their meaning in a balance sheet.
August 6, 2025
Paid parental leave changes have now commenced As from 1 July 2025, the amount of Paid Parental Leave available to families increased to 24 weeks, and the amount of Paid Parental Leave that parents can take off at the same time has also increased from two weeks to four weeks. Superannuation will now also be paid on Government Paid Parental Leave from 1 July 2025, at the new super guarantee rate of 12%, paid as a contribution to their nominated superannuation fund. Parents will also benefit from an increase in the weekly payment rate of Paid Parental Leave, increasing from $915.80 to $948.10 (in line with the increase to the National Minimum wage). This means a total increase of $775.20 over the 24-week entitlement.
July 28, 2025
Contracts often include price variations relating to bonuses / penalties / rebates – why do we need to consider these early? Many revenue streams are covered by AASB 15 Revenue from Contracts with Customers. The core principle of this standard is ‘that an entity shall recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.’ [emphasis added]. To determine what we expect to receive, all elements of the contract that are not fixed need to be reviewed. We need to review contracts for: Volume discounts Rebates Refunds Performance bonuses Penalties Price concessions Once we have identified variable consideration then we need to estimate the amount expected to be received using either: the expected amount using a probability weighted average of the likely outcomes or the most likely outcome. The method chosen is the one deemed to be the best estimate of the expected consideration, and the amounts may be updated at each reporting date. Once the consideration has been determined, the entity recognises only the revenue that is highly probable will occur – this is known as the constraint on revenue recognition. Practically, the requirements discussed above for variable consideration are relevant only where an entity satisfies the requirements for revenue recognition over time and contract crosses a reporting date.  As the estimate of the variable consideration changes, there may need to be a catch-up adjustment on previous revenue recognition for that contract.
More Posts