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  • Abnormal income and primary production trusts

    A taxpayer who would otherwise be eligible to elect to spread abnormal income over a period of years may become ineligible if a 'disentitling event' happens.

    Find out about:

    Disentitling events

    These disentitling events may include:

    • death
    • bankruptcy or insolvency
    • permanent departure from Australia
    • ceasing to carry on the primary production business to which the election relates.

    Disentitling events in the case of trusts

    In the case of a trust, disentitling events may happen at the trustee or beneficiary level. Here, the Commissioner of Taxation may make a determination that certain disentitling events have not happened if:

    • it is fair and reasonable to do so having regarding to certain factors, and
    • the disentitling event occurred at the beneficiary level in the following ways:
      • where the beneficiary of a primary production trust:
        • becomes bankrupt, insolvent, or commences to be wound up, or
        • leaves Australia permanently, or it appears to us that a beneficiary is about to do so

    If a disentitling event happens at either the trustee or beneficiary level before the trustee has made a relevant election, the trustee cannot then make the election.

    If a disentitling event happens at either the trustee or beneficiary level after the trustee has made an election, the trust's assessable income for the income year in which the event happens must include either:

    • the proceeds of the disposal or death of livestock
    • the insurance recovery for the loss of livestock or trees, or
    • the proceeds of the sale of two wool clips.

    Amounts included as assessable income are reduced by any amounts already included as assessable income in previous income years.

    Requesting the Commissioner's determination

    You may make an application requesting that the Commissioner make a determination that certain disentitling events did not happen at the beneficiary level. If the Commissioner makes such a determination, this would allow the trustee to make an election, or continue with an existing election.

    There is no application form. This request is normally in writing from the trustee, with a brief outline of the circumstances giving rise to the disentitling event happening.

    A beneficiary of a trust who becomes bankrupt and/or is planning to leave Australia permanently should make the trustee aware of their circumstances so they can make the application.

    The Commissioner may make the determination if it is fair and reasonable to do so, having regard to:

    • the nature of the disentitling event
    • any relevant circumstances relating to the beneficiary
    • any other relevant circumstances relating to the trust
    • any other matters considered relevant.

    The trustee will receive a written copy of the determination.

    Applications requesting the Commissioner make such a determination should be mailed to:

    Australian Taxation Office
    PO Box 3000
    PENRITH  NSW  2740

    See also:

      Last modified: 24 Aug 2016QC 27306