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  • 4. Interposed entity election status

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    This item must be completed if any of the following apply:

    • The company has previously made one or more interposed entity elections specifying a day in the income years from 1994–95 to 2014–15 in accordance with            
      • section 272-85 of Schedule 2F to the ITAA 1936 and,
      • if applicable, item 23 or 23A of Schedule 1 to the Taxation Laws Amendment (Trust Loss and Other Deductions) Act 1998, and
      • at least one interposed entity election has not been revoked, in accordance with subsections 272-85(5A) to (8), in an income year before the 2014–15 income year.
       
    • The company is making one or more interposed entity elections specifying a day in the 2004–05 or later income years in accordance with section 272-85 of Schedule 2F to the ITAA 1936.
    • The company is revoking, from a time in the 2015–16 income year, one or more previously made interposed entity elections in accordance with section 272-85 of Schedule 2F to the ITAA 1936.

    Do not attach election forms for an interposed entity election made specifying an income year before the 2004–05 income year to the Company tax return 2016. Under section 272-85 of Schedule 2F to the ITAA 1936 a company cannot make an interposed entity election specifying a year earlier than 2004–05 in the Company tax return 2016.

    Amendments to Schedule 2F to the ITAA 1936 as enacted in the Tax Laws Amendment (2007 Measures No. 4) Act 2007 may affect the information that you complete at this item. The amendments apply to income years starting on or after 1 July 2007.

    Changes to section 272-85 of Schedule 2F to the ITAA 1936 now allow an interposed entity election to be revoked in limited circumstances.

    The company cannot revoke an interposed entity election unless the revocation is for an income year that occurs during the period:

    • starting on 1 July 2007 and finishing on 30 June 2009, or
    • starting at the later of      
      • the beginning of the income year specified in the election, and
      • the beginning of the income year in which the entity became a member of the family group
       

    and finishing at the end of the fourth income year after the income year referred to in the above two dot points.

    The revocation must be made with the entity’s return of income for the income year from which the revocation is to be effective.

    Instructions on how to complete the Interposed entity election or revocation 2016 are on the form.

    If you are not using ELS, and an Interposed entity election or revocation 2016 is being lodged with your Company tax return 2016, send your tax return and the Interposed entity election or revocation 2016 to:

    Australian Taxation Office
    GPO Box 9845
    [insert the name and postcode of your capital city]

    For example;

    Australian Taxation Office
    GPO Box 9845
    SYDNEY NSW 2001

    If the company has previously made one or more elections specifying a day in an income year before the 2015–16 income year, write the earliest income year specified in the box at L unless the company is making one or more elections specifying a day in the 2004–05 or later income year.

    If the company has previously made one or more elections specifying a day in an income year before the 2004–05 income year and took advantage of the one-off opportunity in Law Administration Practice Statement PS LA 2004/1 (GA) – Lodgment opportunity for family trust and interposed entity elections to specify an earlier year, write the earliest income year specified in the box at L unless the company is making one or more elections specifying a day in the 2004–05 or later income year.

    If the company is making one or more interposed entity elections specifying a day in the 2004–05 or later income year, write the earliest income year specified in the box at L and complete an Interposed entity election or revocation 2016 for each election specifying a day in the 2004–05 or later income year.

    If the company has not made or is not making any interposed entity elections, do not complete this item.

    Revocation

    An interposed entity election can only be revoked by a company that satisfies all of the relevant conditions in subsection 272-85 of Schedule 2F to the ITAA 1936.

    Print the code R in the box at this item if the interposed entity election made by the company is being revoked from a time in the 2015–16 income year. An Interposed entity election or revocation 2016 must be completed and lodged with the Company tax return 2016.

    Example 1: New election, specifying the current year

    The company has not previously made an interposed entity election. The company wants to make an interposed entity election specifying a day in the 2015–16 income year.

    • Write 2016 in the box at L.
    • Complete an Interposed entity election or revocation 2016, specifying a day in the 2015–16 income year, to provide details of the interposed entity election the company is making.

    The completed form can be attached to the company’s 2016 tax return.

    Example 2: New election, specifying an earlier year

    The company has not previously made an interposed entity election. The company wants to make an interposed entity election specifying a day in the 2004–05 income year.

    • Write 2005 in the box at L.
    • Complete an Interposed entity election or revocation 2016, specifying a day in the 2004–05 income year, to provide details of the interposed entity election the company is making.

    The completed form can be attached to the company’s 2016 tax return.

    Example 3: One existing election

    The company has previously made an interposed entity election specifying a day in the 1994–95 income year and is not making another interposed entity election.

    • Write 1995 in the box at L.

    The company does not need to complete an Interposed entity election or revocation 2016.

    Example 4: Multiple existing interposed entity elections

    The company has previously made interposed entity elections specifying a day in the 1997–98 and 2005–06 income years respectively. It is not making another interposed entity election.

    • Write 1998 in the box at L.

    The company does not need to complete an Interposed entity election or revocation 2016.

    Example 5: Additional election, specifying a current year

    The company has previously made an interposed entity election specifying a day in the 1996–97 income year and is making another interposed entity election specifying a day in the 2015–16 income year.

    • Write 2016 in the box at L.
    • An Interposed entity election or revocation 2016 form must be completed, specifying a day in the 2015–16 income year, to provide details of the interposed entity election the company is making.

    The completed form can be attached to the company’s 2016 tax return.

    Example 6: Revoking an election

    The company has previously made an interposed entity election specifying a day in the 2007–08 income year and is revoking the election from a day in the 2015–16 income year.

    • Write 2008 in the box at L.
    • Print R in the box at this item.
    • Complete an Interposed entity election or revocation 2016, specifying the day in the 2015–16 income year.

    The form must be lodged with the company’s 2016 tax return.

    An interposed entity election is taken to be revoked if the family trust election to which it relates is revoked.

    End of example

    Family trust distribution tax

    A company may make an interposed entity election under section 272-85 of Schedule 2F to the ITAA 1936 to be included in the family group of an individual specified in a family trust election made by a trust under section 272-80 of Schedule 2F to the ITAA 1936.

    A company that is wholly owned, directly or indirectly, by the relevant family may not need to make an interposed entity election to be included in the family group of the specified individual, see subsection 272-90(5) of Schedule 2F to the ITAA 1936.

    A consequence of a company making an interposed entity election is that under section 271-30 of Schedule 2F to the ITAA 1936 the company pays a special tax, called family trust distribution tax (FTDT), at 49% on any conferral of present entitlement to, or distribution of, the company’s income or capital to persons who are not members of the family group of the specified individual within the meaning of section 272-90 of Schedule 2F to the ITAA 1936. For this purpose, a company’s distribution of income or capital has the meaning given in sections 272-50 and 272-60 of Schedule 2F to the ITAA 1936.

    For income years commencing on or after 1 July 2007, the definition of ‘family group’ includes a former spouse, a former widow or widower, and a former step child.

    From 1 July 2009 and later years ‘spouse’ includes another person (whether of the same sex or opposite sex) who:

    • you were in relationship with that was registered under a prescribed state or territory law
    • although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple.

    Mail the Family trust distribution tax payment advice with your FTDT payment to the appropriate address (see Mail). Make cheques or money orders payable to the Deputy Commissioner of Taxation and print ‘Not negotiable’ across the cheque. Tender all cheques in Australian currency. Do not send cash by post.

    Last modified: 02 Oct 2019QC 48080