• Family trust election status and 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.

    Family trust elections

    The trustee of the trust:

    • is making a family trust election specifying the 2004-05 or later income year in accordance with section 272-80External Link of Schedule 2F to the ITAA 1936
    • has previously made a family trust election specifying an income year from 1994-95 to 2010-11 in accordance with section 272-80 of Schedule 2F to the ITAA 1936 and, if applicable, items 22External Link or 22AExternal Link of Schedule 1 to the Taxation Laws Amendment (Trust Loss and Other Deductions) Act 1998 (Trust Loss Act), and that election has not been revoked in accordance with subsections 272-80(6) to (8) of Schedule 2F to the ITAA 1936 in an income year before the 2011–12 income year
    • is revoking a previously made family trust election in accordance with section 272-80 of Schedule 2F to the ITAA 1936
    • is varying the specified individual of a previously made family trust election in accordance with section 272-80 of Schedule 2F to the ITAA 1936.

    Interposed entity elections

    The trustee of the trust:

    • is making one or more interposed entity elections specifying a day in the 2004-05 or later income year in accordance with section 272-85External Link of Schedule 2F to the ITAA 1936
    • has previously made one or more interposed entity elections specifying a day in any income year from 1994-95 to 2010-11 in accordance with section 272-85 of Schedule 2F to the ITAA 1936 and, if applicable, items 23 or 23A of Schedule 1 to the Trust Loss Act, and at least one interposed entity election has not been revoked in an income year before the 2011–12 income year in accordance with subsections 272-85(5) and (6) of Schedule 2F to the ITAA 1936
    • is revoking from the 2011–12 income year one or more previously made interposed entity elections in accordance with section 272-85 of Schedule 2F to the ITAA 1936.

    A trustee cannot make a family trust election or interposed entity election specifying a year earlier than 2004-05 in the Trust tax return 2012 (sections 272-80 and 272-85 of Schedule 2F to the ITAA 1936). Do not attach election forms for family trust and interposed entity elections made specifying an income year before the 2004-05 income year to the Trust tax return 2012.

    Amendments to Schedule 2F to the ITAA 1936 in the Tax Laws Amendment (2007 Measures No.4) Act 2007External Link may affect the information that you complete at these items.

    Family trust elections

    Changes to section 272-80External Link of Schedule 2F to the ITAA 1936 allow a trustee to revoke a family trust election and vary the specified individual in a family trust election in certain limited circumstances.

    A trustee cannot vary the specified individual or revoke a family trust election unless the variation or revocation satisfies certain conditions and is in respect of an income year that occurs during the period:

    • starting at the beginning of the income year specified in the election and finishing at the end of the fourth income year after the income year specified in the election, or
    • starting on 1 July 2007 and finishing on 30 June 2009.

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

    Interposed entity elections

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

    A trustee cannot revoke an interposed entity election unless the revocation is in respect of 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, or
      • 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 tax return for the income year from which the revocation is to be effective.

    For further details on these amendments see Family trusts - details of amendments.

    Instructions on how to complete the Family trust election, revocation or variation 2012 and Interposed entity election or revocation 2012 are on the forms themselves.

    If you do not lodge the trust tax return electronically using ELS, then send the tax return with any Family trust election, revocation or variation 2012 and Interposed entity election or revocation 2012 to:

    Australian Taxation Office
    GPO Box 9845
    IN YOUR CAPITAL CITY

    Family trust election status

    If the trustee of the trust has not made or is not making a family trust election, do not complete this item.

    If the trustee has previously made a family trust election specifying an income year before the 2011–12 income year, write the appropriate income year in the four-digit box at this item.

    If the trustee has previously made a family trust election specifying an income year before the 2004-05 income year and took advantage of the one-off opportunity in PS LA 2004/1 (GA)External Link Lodgment opportunity for family trust and interposed entity elections to specify an earlier year, write the earlier income year specified.

    If the trustee is making a family trust election specifying the 2004–05 or later income year, write the appropriate income year in the four-digit box at this item and complete a Family trust election, revocation or variation 2012 specifying the 2004–05 or later income year.

    Revoking a family trust election

    A family trust election can only be revoked by a trust that satisfies the relevant conditions in section 272-80External Link of Schedule 2F to the ITAA 1936.

    Print R in the single box at this item if the family trust election made by the trust is being revoked in the 2011–12 income year. A Family trust election, revocation or variation 2012 must be completed and lodged with the 2011-12 tax return of the trust.

    Varying the test individual of a family trust election

    If the relevant conditions in section 272-80 of Schedule 2F to the ITAA 1936 are satisfied, the trust may vary an election so a different individual is specified as the individual whose family group is taken into account in relation to the election.

    The variation must be in respect of an income year that occurs during the period:

    • starting at the beginning of the income year specified in the election and finishing at the end of the fourth income year after the income year specified in the election, or
    • starting on 1 July 2007 and finishing on 30 June 2009.

    The trust may only vary the specified individual of a family trust election once, except where doing so under subsection 272-80(5C)External Link of Schedule 2F to the ITAA 1936 in relation to a relevant order, agreement or award mentioned in paragraphs 126-5(1)(a)External Link to (f)External Link of the ITAA 1997.

    Print V in the single box at this item if the specified individual of a family trust election is being varied from a time in the 2011–12 income year. A Family trust election, revocation or variation 2012 must be completed and lodged with the 2011–12 tax return of the trust.

    Interposed entity election status

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

    If the trustee has previously made one or more interposed entity elections specifying a day in an income year before the 2011-12 income year, write the earliest income year specified in the box at this item.

    If the trustee is making one or more interposed entity elections this year specifying a day in the 2004-05 or later income year, write the earliest income year specified in the box at this item, and complete an Interposed entity election or revocation 2012 for each election specifying a day in the 2004-05 or later income years.

    Revoking an interposed entity election

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

    Print R in the single box at this item if the interposed entity election made by the trust is being revoked from the 2011-12 income year. An Interposed entity election or revocation 2012 must be completed and lodged with the Trust tax return 2012.

    Example 1: New elections, specifying the current year

    The trustee has not previously made a family trust election or an interposed entity election but wants to make a family trust election specifying the 2011–12 income year and make an interposed entity election specifying a day in the 2011–12 income year.

    End of example

    Write:

    • 2012 in the box at Family trust election status, and
    • 2012 in the box at Interposed entity election status.

    Complete a Family trust election, revocation or variation 2012 specifying the 2011–12 income year.

    Complete an Interposed entity election or revocation 2012 specifying a day in the 2011–2 income year.

    Attach the completed forms to the Trust tax return 2012.

    Example 2: New elections, specifying an earlier year

    The trustee has not previously made a family trust election or an interposed entity election. The trustee decides to make a family trust election specifying the 2004–05 income year and an interposed entity election specifying a day in the 2004–05 income year.

    End of example

    Write:

    • 2005 in the box at Family trust election status, and
    • 2005 in the box at Interposed entity election status.

    Complete a Family trust election, revocation or variation 2012 specifying the 2004–05 income year.

    Complete an Interposed entity election or revocation 2012 specifying a day in the 2004–05 income year.

    Attach the completed forms to the Trust tax return 2012.

    Example 3: Existing elections, taken advantage of the one-off opportunity

    The trustee previously made a family trust election specifying the 2002–03 income year.

    The trustee took advantage of the one-off opportunity in PS LA 2004/1 (GA)External Link Lodgment opportunity for family trust and interposed entity elections requesting that the election apply from the 1995–96 income year.

    End of example

    Write 1996 in the box at Family trust election status.

    The trustee does not need to complete a Family trust election, revocation or variation 2012.

    Example 4: Additional elections, specifying a current year

    The trustee has previously made a family trust election specifying the 1996–97 income year and an interposed entity election specifying a day in the 1997–98 income year. The trustee decides to make another interposed entity election specifying a day in the 2011–12 income year.

    End of example

    Write:

    • 1997 in the box at Family trust election status, and
    • 2012 in the box at Interposed entity election status.

    Complete an Interposed entity election or revocation 2012 specifying a day in the 2011–12 income year.

    Attach the completed form to the Trust tax return 2012.

    Example 5: Revoking a family trust election

    The trustee previously made a family trust election specifying the 2007–08 income year and is revoking the family trust election from a day in the 2011–12 income year. The trustee has not made any interposed entity elections.

    End of example

    Write:

    • 2008 in the box at Family trust election status, and
    • R in the single box at Family trust election status as the trustee is revoking a family trust election.

    Complete a Family trust election, revocation or variation 2012.

    Lodge the completed form with the Trust tax return 2012.

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

    Example 6: Varying a family trust election

    The trustee previously made a family trust election specifying the 2007–08 income year, and an interposed entity election specifying the 2001–02 income year. The trustee is varying the specified individual of the family trust election from the first day in the 2011–12 income year.

    End of example

    Write:

    • 2008 in the box at Family trust election status
    • 2002 at Interposed entity election status, and
    • V in the box at Family trust election status as the trustee is varying the specified individual of a family trust election.

    Complete a Family trust election, revocation or variation 2012.

    Lodge the completed form with the Trust tax return 2012.

    End of example

    Family trust distribution tax

    A consequence of a trust making a family trust election or an interposed entity election is that under section 271-15External Link or section 271-20External Link of Schedule 2F to the ITAA 1936 a special tax, called family trust distribution tax (FTDT), is payable at 46.5% by the trustee on any conferral of present entitlement to, or distribution of, income or capital of the trust to persons who are not members of the family group of the specified individual within the meaning of section 272-90External Link of Schedule 2F to the ITAA 1936.

    For this purpose a distribution of income or capital by a trust has the meaning given in sections 272-45External Link and 272-60External Link of Schedule 2F to the ITAA 1936.

    Effective from 1 July 2007, the definition of 'family group' was amended to include a former spouse, a former widow or widower, and a former stepchild.

    These terms are as follows:

    • former spouse is a person who was a spouse of either the primary individual or a member of the primary individual's family before a breakdown in the marriage or relationship
    • former widow or widower is a person who was the spouse of the primary individual or a member of the primary individual's family immediately before the death of the primary individual or member of the primary individuals family, and who has a new spouse who is not a member of the primary individual's family
    • former stepchild is a person who was a stepchild of either the primary individual or a member of the primary individual's family, before a breakdown in the marriage or relationship of the primary individual or the member of the primary individual's family.

    If FTDT is payable by you, complete the Family trust distribution tax payment advice and post it with your FTDT payment to us at the address shown on the FTDT payment advice. 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.

    Definition of spouse

    Your 'spouse' includes another person (whether of the same sex or opposite sex) who:

    • you were in a 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.
    Interaction between family trust distribution tax and TFN withholding for closely held trust rules

    If you are the trustee of a trust that has made a family trust election or an interposed entity election and make a payment or distribution to a beneficiary that is not subject to FTDT, you need to consider TFN withholding for closely held trusts.

    For more information, see appendix 12.

    Last modified: 13 Aug 2014QC 28037