# Working out the amount of attributable income to include in your assessable income

Last updated 4 December 2006

If you are an attributable taxpayer in relation to a non-resident trust estate, all the attributable income of the non-resident trust estate for an income year coinciding with your income year is included in your assessable income.

If there is more than one attributable taxpayer, the Tax Office may allow a reduction of the amount of attributable income to be included in the assessable income of each attributable taxpayer. To obtain the reduction, the taxpayer must apply to the Tax Office - refer to subsection 3 for more information.

## Resident for part of a year

If you are a resident for only part of the income year, the attributable income included in your assessable income is reduced. The amount included is worked out as follows:

Notional attributable income

×

the number of days during the period that you were a resident ÷ total number of days in the period

Example 3: Part-year residency

George is a resident of Australia for 200 days out of the 365 days in the income year 1 July 2003 to 30 June 2004. He is an attributable taxpayer in relation to YZ trust that was a non-resident trust with the same income year. The attributable income of the trust estate was \$40,000.

The amount George is required to include in assessable income for 2003-04 is:

\$40,000 × (200 ÷ 365) = \$21,917

End of example

Overlapping years of income

If you are an attributable taxpayer and your income year is different from that of a non-resident trust estate, the trust estate's attributable income for the two income years which overlap your income year is apportioned using the number of days that fall within your current income year.

Example 4: Overlapping years of residency

Helen's current income year is 1 July 2003 to 30 June 2004. She is an attributable taxpayer in relation to XY trust estate. The trust estate's income years are 1 January 2003 to 31 December 2003 and 1 January 2004 to 31 December 2004. The attributable income of the trust estate is \$30,000 for the 2003 income year and \$40,000 for the 2004 income year.

The amount worked out for the trust estate's 2003 income year is:

\$30,000 × (184 ÷ 365) = \$15,123

For the trust estate's 2004 income year, the amount is:

\$40,000 × (181 ÷ 365) = \$19,835

Helen adds the amounts to give a total attributable income of \$34,958 for her 2003-04 income year.

End of example

## Partnerships and trusts

The attributable income from a trust estate is included in working out the net income of a partnership or a trust estate and is treated as having a foreign source.

Where a partner of a partnership or a beneficiary of a trust estate is an Australian resident for the whole income year, they are to include in their assessable income their share of the net income - including attributable income - of the partnership or trust estate.

Where a partner or beneficiary is a non-resident of Australia at all times during an income year, they would not include any attributable income of the partnership or trust estate in their assessable income.

## Subsection 2 - Working out your assessable income where you do not have sufficient information to work out attributable income

If you are unable to obtain the information necessary to work out the attributable income of a trust estate, you must include an amount worked out using the following formula in your assessable income.

The formula is to be used for each transfer of property or services you made to the trust estate that is subject to the transferor trust measures.

The amount to include in your assessable income is worked out by applying a deemed rate of return to the market value of the property or services you transferred to the trust estate. The market value is adjusted for this calculation to reflect deemed returns for previous periods. The deemed rate of return for a particular period is 5% above the rate of interest that applies for that period under section 214A of the Act less 4 percentage points. If there are two or more rates of interest for the income year, you use the weighted average of these rates for the income year. The weighted average of the section 214A rate less 4 percentage points is referred to as the weighted statutory interest rate.

Use the following formulas to determine the amount to include in your assessable income for transfers of property or services after 12 April 1989.

Transfers made after 12 April 1989

Amount to be included in assessable income

=

Adjusted value of the transfer

×

Weighted statutory interest rate plus 5%

The adjusted value for transfers made during the current income year is worked out as follows.

Adjusted value of the transfer

=

Market value, immediately before the transfer of property or services

×

Days after the transfer to the end of the income year, divided by days in income year

Example 5: Transfer during current income year

An attributable taxpayer transferred property worth \$30,000 to a non-resident trust estate on 31 May 2004. There are 30 days between the transfer on 31 May and the end of the year - 30 June 2004.

The adjusted value is worked out as follows:

\$30,000 × (30 ÷ 365) = \$2,465

End of example

If the transfer occurred before the taxpayer's current income year, the adjusted value of the transfer is the total of:

• the market value, immediately before the transfer, of the property or services transferred, and
• the total of the amounts that would have been included in the transferor's assessable income for that transfer in the income years preceding the taxpayer's current income year, if this method had been used in those years.

Where more than one transfer was made after 12 April 1989, the formula is applied separately to each transfer and then the relevant amounts are added together.

## Transfers made before 12 April 1989

Use the following formula to determine the amount to include in your assessable income for transfers of property or services before 12 April 1989.

Amount to be included in assessable income

=

Adjusted net worth of the trust estate

×

Weighted statutory interest rate plus 5%

The adjusted net worth of a trust estate is its net worth adjusted for the deemed return on the property or services transferred before 12 April 1989.

The net worth of the trust estate is determined on 1 July 1990. Its net worth on that date is the market value of its assets at 1 July 1990, reduced by its liabilities on 1 July 1990.

To determine the adjusted net worth, the net worth is increased by the total of amounts that would be worked out in each previous income year commencing on or after 1 July 1990 using the above formula.

When using the formula method to work out the amount to include in your assessable income, if two or more taxpayers have transferred property or services to the trust estate, the Tax Office is empowered to provide relief along lines similar to those referred to below in subsection 3.

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