• Attribution of non-resident trust income where the FIF measures do not apply

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    Since 1992-93, the share of the income of an Australian beneficiary of a non-resident trust who is not assessed under the FIF measures has been worked out by one of two methods. [sections 96B and 96C]

    Method 1

    This method is used where all the income, profits or gains derived by the non-resident trust estate during the income year consisted of either or both:

    • income, profits or gains to which beneficiaries of the non-resident trust estate were presently entitled
    • income, profits or gains to which beneficiaries of the non-resident trust estate were not presently entitled but which were distributed to the beneficiaries within two months after the end of the income year.

    In the above cases, the beneficiaries are deemed to be presently entitled to a share of the net income of the non-resident trust estate equal to the percentage of the total income, profits or gains derived by the non-resident trust during a year of income.

    This percentage is represented by the total of the amounts:

    • to which the beneficiaries were presently entitled, or
    • to which the beneficiaries were not presently entitled but which were distributed to the beneficiaries of the trust estate within two months after the end of the income year. [subsection 96C(1)]

    Method 2

    Where method 1 cannot be applied, a beneficiary's share of the net income of the trust estate is determined by:

    • calculating the beneficiary's share of the net income of the trust estate that relates to interests the beneficiary held in the trust estate for the whole year
    • calculating the beneficiary's share of the net income of the trust estate that relates to interests the beneficiary held in the trust estate for only part of the year, and
    • adding these amounts to determine the beneficiary's total share of the net income of the trust estate that relates to all the interests the beneficiary held in the trust estate. [subsections 96C(2) to (5)]

    If the aggregate of the Australian beneficiaries' present entitlement is more than 100% of the income of the non-resident trust estate, the total interests are reduced to 100% and each beneficiary's interests are reduced proportionally. [subsection 96C(6)]

    Last modified: 28 Jun 2007QC 27895