Section 99B and Foreign Trusts

What is Section 99B and what does it mean for Australian Expats?

This article explores Section 99B, shedding light on its implications for Australian residents with foreign trust interests.

Section 99B is a complex provision under Australian tax law. Broadly, it deals with the receipt of foreign trust income that has not previously been subject to Australian tax. Australian residents may need to report foreign trust payments, assets, or benefits when received. You can learn more about it here.

Broadly, where you are considered a tax resident of Australia and receive a distribution from an overseas trust, it’s essential to give thorough thought to Section 99B.

While the starting point is that distributions obtained by a beneficiary residing in Australia from a trust established abroad will incur taxation in Australia, there are several important exceptions within this provision that may be applicable.

One notable exclusion to bear in mind is that sums denoting the ‘corpus’ of the trust are typically exempt from taxation under section 99B. A corpus amount typically refers to funds or assets contributed to the trust in the form of capital or property. The corpus exclusion will require an analysis of the history of the corpus with tracing and records to ensure the amount is able to reduce the taxable component.

For an individual relocating to Australia, planning should be carried out prior to commencing Australian tax residency.  For example, Section 99B and Foreign Trusts Tax would normally apply to a US Retirement Fund (401k or IRA). Please see more here https://www.murphytax.com.au/us-expats-and-the-tax-implications-of-withdrawing-your-us-retirement-plans-401k-ira-in-australia/

Please do not hesitate to get in touch with any questions.

Murphy Tax

www.murphytax.com.au