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Right of Indemnity
2016 Trust Symposium
In tax, the existence of the trustee’s right of indemnity causes unexpected results for tax purposes. One example is the 2004 draft ruling, TR 2004/D25, about CGT and when a beneficiary is absolutely entitled to a trust asset. This remains unresolved 11 years after issue for comment. If that draft ruling be correct, despite the ongoing litigation in Oswal v FCT, opportunities exist for planning beneficiaries’ affairs.
In insolvency, it is essential to know whether the trustee’s right to indemnity or exoneration is available, and how that right might be accessed indirectly by subrogation. More particularly, a creditor may seek priority by accessing the trustee’s lien through subrogation. Complex questions exist as to priorities.
It has also been fashionable to deal with, or attempt to exclude the right of indemnity. Such dealings overlay the complexities of the tax and insolvency.
David Marks QC, Inns of Court, Brisbane
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