Graduated Tax Rates for Testamentary Trusts to be Eliminated!

On June 3, 2013, the Department of Finance released a consultation paper to outline their proposal to eliminate graduated tax rates for testamentary trusts, because they "raise questions of fairness, and negatively affect government tax revenues." Comments will be received until December 2, 2013.

The government proposes to apply flat top-rate taxation to grandfathered inter vivos trusts and trusts created by will. The proposals also suggest that estates should benefit from graduated rates for only the first 36 months of the estate's administration, after which time the flat top-rate taxation would apply. These measures would apply to existing and new arrangements for 2016 and later taxation years.