Section 100A reimbursement agreements: the ‘ordinary family dealing’ exception

Section 100A is an anti avoidance provision which allows the ATO Commissioner to disregard trust distributions that are made as part of “reimbursement agreements” and tax the trustees at the top marginal rate.

For the last five years, Section 100A has been under review, with the aim to explore exclusions to reimbursement agreements, including:

• agreements not entered into with a purpose of eliminating or reducing someone’s income tax, and
• agreements entered into in the course of ordinary family or commercial dealings.

In the lead up to the ATO publishing its Draft Taxation Ruling on the “ordinary family and commercial dealing” exception in s100A, we caught up with Tom Hendrick FTI, from Finlaysons Lawyers to talk about his session 100A Reimbursement Agreements, in our upcoming Darwin Tax Convention on 6 November.

“Now is a great time to understand the issues arising under sec. 100A, the very important ‘ordinary family dealing’ exception, and what the future might bring for trusts,” Tom said.

In his session, Tom will be exploring the benefits trusts can offer for your clients, both families and businesses, including asset protection and flexibility.

“Attendees can expect to gain a better understanding of the issues in the lead up to the ATO publishing its Draft Taxation Ruling on the ‘ordinary family and commercial dealing’ exception in s100A,” he said.

This timely and relevant session will cover sec. 100A from A-Z and include Tom’s insights into topics such as:

• the “state of the [tax] Nation” in Australia in June 1978 when the Government first announced the introduction of sec. 100A
• a summary and overview of sec. 100A’s provisions, with reference to the cases that have considered sec. 100A
• a review of how the expression “ordinary family and business dealing” came about and the difficulties associated with identifying “ordinary” family dealings
• case studies incorporating the ATO’s public statements and examples about sec. 100A
• some of Tom’s observations on the future of sec. 100A

“I will provide a number of easy to follow examples about: what is a ‘reimbursement agreement’? What are the consequences? What are the possible exemptions? What are the potential benefits if section 100A does not apply?” Tom said.

“Section 100A is one of many tax provisions which, if not properly understood, can cause a trust structure to do more harm than good for clients.”

About the Darwin Tax Convention

The inaugural Darwin Tax Convention on 6 November will give delegates practical insight into a range of current tax issues, concerns and strategies affecting SME clients and professional practices in the Northern Territory.

This one day event is an unmissable opportunity build connections with peers and tax leaders from accounting, law, financial services and regulatory backgrounds.

We asked Tom what other sessions he was looking forward to attending at the 2020 Darwin Tax Convention. His response? “Don’t make me choose!”

“I’m looking forward to Sandrina Disney explain ‘the interaction between accounting & taxation when it comes to Division 7A’; Cheryl Mallet dispel common misconceptions about superannuation death benefit cases ‘through a series of role plays’ (wow!); as well as closing the event with a big finish ‘What’s keeping you up at night in a COVID/post COVID world?’ starring NT’s leading practitioners.”

Register for the Darwin Tax Convention now.

About presenter Tom Hendrick FTI

Tom Hendrick FTI is an Associate lawyer exclusively practising in tax and revenue matters with Finlaysons Lawyers. He previously worked as Tax Technical Advisor with the ATO in 2016.

Tom has been a member of the Tax Institute since 2015, when he started the CTA program - immediately after finishing university and promising himself that he would never study again. He quickly broke that promise and is glad he did, because the CTA helped him find his calling in tax advisory.

When he’s not drafting letters of advice or private ruling applications for clients in the wine industry, dealing with international tax matters or preparing business/succession tax structuring advice, Tom has a little-known affinity for stand-up comedy.

“If I can make an audience laugh at a tax CPD event (on purpose), I feel like I’ve achieved something,” he said.

Don’t miss your opportunity to attend this key annual event where leading tax advisors offer practical insight and takeaways to benefit you and your SME clients.

Click here for the full program and registration.