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Bamford Update

By NTAA Corporate

Bamford review service not available as of 1 January 2013.

The High Court decision in the case of FCT v Bamford [2010] HCA 10 shook up the tax and trust worlds a lot, and the ramifications are still being felt (such as with the proposed rewrite of the entire taxation of trust income provisions in the ITAA 1936).

Our trust deeds have always been able to take advantage of the issues raised by Bamford - primarily, our discretionary trust deeds have always provided the trustee with the power to, for example, treat capital gains as trust income (and, therefore, allow such a trustee to distribute capital gains as part of the income distribution of the trust each year). In addition, our deed have always allowed for the streaming of trust income as well (such as capital gains and franked dividends). For more on how our discretionary trust deeds deal with these issues, please refer to

However, not all trust deeds were as flexible, and so in the immediate wake of the Bamford decision, we offered members a "Bamford review service", whereby our lawyers would review other trust deeds to identify if they, too, could allow trustees to take advantage of the Bamford decision and, if not, what options they might have. One of the main reasons for offering this service was because many members were being told by others that ALL their deeds needed to be amended in light of Bamford, which we thought was unnecessary and, possibly, quite dangerous.

However, since offering this service, a number of changes have occurred that now mean that the vast majority of discretionary trusts should have sufficient flexibility when it comes to trust distributions. In particular:

  • The changes made to the trust taxation provisions by the Tax Laws Amendment (2011 Measures No. 5) Act 2011 mean that most trusts, even those that do not allow capital gains to be included in trust income, will still be able to specifically distribute capital gains by means of a capital distribution. Also, even if trusts do not have this power, or do not exercise it, capital gains will still be taxed in the hands of any beneficiaries presently entitled to any other trust income;
  • The ATO has confirmed (refer that even if a trust deed does not contain an express power to stream (for example) capital gains and franked dividends, they will have an implied power to stream if the trust deed gives the trustee a general power to distribute income, and the trust deed does not prohibit streaming (which will be most trust deeds).

Consequently, as these changes mean the "Bamford review service" is no longer necessary for most trusts, we will cease offering it from 1 January 2013.

If you would like more information regarding the above changes to the taxation of trust income, please refer to, or feel free to contact a member of the NTAA's TaxTeam on the Hotline by calling 1800 808 105.