Taxing trust income by "entitlement": The end of the road?

The presently entitled formula establishes and allocates tax liability for trust income in Div 6 of the Income Tax Assessment Act 1936 (Cth). However, entitlement does not provide a stable link between taxpayers and the economic advantages associated with trusts. The meanings of "presently entitled" and "trust estate" are ambiguous in both Anglo-Australian and American trusts law. Unsurprisingly, Australian courts have wrestled with the terms for many years. The utility of continuing with the presently entitled formula to tax trust income is questioned in light of the new specifically entitled regime for taxing trusts' capital gains. The article also considers interest in possession trusts in the United Kingdom and the recent authorities of Colonial First State Investments Ltd v FCT and Howard v FCT.