• 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 272-80 of Schedule 2F to the ITAA 1936
    • has previously made a family trust election specifying an income year from 1994–95 to 2013-14 in accordance with section 272-80 of Schedule 2F ITAA 1936 and, if applicable, items 22 or 22A 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1 to the Taxation Laws Amendment (Trust Loss and Other Deductions) Act 1998 (Trust Loss Act), and that election has not been revoked in accordance with subsections 272-80(6) to (8) of Schedule 2F to the ITAA 1936 in an income year before the 2014–15 income year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 272-85 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 2013-14 in accordance with section 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if applicable, items 23 or 23A of Schedule 1 to the Trust Loss Act, and at least one interposed entity election has not been revoked in an income year before 2014–15 in accordance with subsections 272-85(5) and (6) of Schedule 2F to the ITAA 1936
    • is revoking from 2015–16 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 2016 (sections 272-80 and 272-85 of Schedule 2F to the ITAA 1936).

    Family trust elections

    Changes to section 272-80 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 272-85 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 more details, see Trust loss provisions to increase flexibility for family trusts.

    Instructions on how to complete the Family trust election, revocation or variation 2016 and Interposed entity election or revocation 2016 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 2016 and Interposed entity election or revocation 2016 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 2014–15, 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 2004–05 and took advantage of the one-off opportunity in PS LA 2004/1 (GA) 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 2016 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 272-80 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 2015–16. A Family trust election, revocation or variation 2016 must be completed and lodged with the 2014–15 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) of Schedule 2F to the ITAA 1936 in relation to a relevant order, agreement or award mentioned in paragraphs 126-5(1)(a) to (f) 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 2015–16. A Family trust election, revocation or variation 2016 must be completed and lodged with the 2014–15 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 2015–16, 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 2016 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 272-85 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 2014–15. An Interposed entity election or revocation 2016 must be completed and lodged with the Trust tax return 2016.

    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 2015–16 and make an interposed entity election specifying a day in 2015–16.

    End of example

    Write:

    • 2016 in the box at Family trust election status
    • 2016 in the box at Interposed entity election status.

    Example

    Complete a Family trust election, revocation or variation 2016 specifying the 2015–16 income year.

    Complete an Interposed entity election or revocation 2016 specifying a day in 2015–16.

    Attach the completed forms to the Trust tax return 2016.

    End of example

     

    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 2004–05 and an interposed entity election specifying a day in 2004–05.

    End of example

    Write:

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

    Example

    Complete a Family trust election, revocation or variation 2016 specifying the 2004–05 income year.

    Complete an Interposed entity election or revocation 2016 specifying a day in 2004–05.

    Attach the completed forms to the Trust tax return 2016.

    End of example

     

    Example 3: Additional elections, specifying a current year

    The trustee has previously made a family trust election specifying 1996–97 and an interposed entity election specifying a day in 1997–98. The trustee decides to make another interposed entity election specifying a day in 2015–16.

    End of example

    Write:

    • 1997 in the box at Family trust election status
    • 2016 in the box at Interposed entity election status.

    Example

    Complete an Interposed entity election or revocation 2016 specifying a day in the 2015–16 income year.

    Attach the completed form to the Trust tax return 2016.

    End of example

     

    Example 4: Revoking a family trust election

    The trustee previously made a family trust election specifying 2007–08 and is revoking the family trust election from a day in 2015–16. The trustee has not made any interposed entity elections.

    End of example

    Write:

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

    Example

    Complete a Family trust election, revocation or variation 2016

    Lodge the completed form with the Trust tax return 2016

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

    End of example

     

    Example 5: Varying a family trust election

    The trustee previously made a family trust election specifying 2007–08, and an interposed entity election specifying 2001–02. The trustee is varying the specified individual of the family trust election from the first day in 2015–16.

    End of example

    Write:

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

    Example

    Complete a Family trust election, revocation or variation 2016.

    Lodge the completed form with the Trust tax return 2016.

    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 271-15 or section 271-20 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 272-90 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 272-45 and 272-60 of Schedule 2F to the ITAA 1936.

    The definition of family group includes a former spouse, a former widow or widower, and a former stepchild.

    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 (of any 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 the TFN withholding for closely held trusts.

    See also:

    Last modified: 31 Aug 2016QC 48243