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Chapter 9: Taxation of non-resident trusts

Last updated 31 March 2020


The foreign investment fund (FIF) amendments to the taxation of non-resident trusts, which began in the 1992-93 income year, supplemented the objective of the foreign source income measures in preventing the deferral of Australian tax.

The FIF measures tax Australian resident beneficiaries with an interest or entitlement to acquire an interest in the income or capital of a foreign trust on their share of the trust income. They are taxed on an accruals basis at the time the income is derived by the trust rather then when its income or capital is distributed.

You work out your share of the FIF income of a non-resident trust to which the FIF measures apply in the same way you would for other FIFs such as foreign companies.

Where the FIF measures apply to a beneficiary of a non-resident trust estate, they will:

  • ensure no amount is included in the assessable income of
    • an Australian beneficiary under section 97, or
    • a trustee, under subsections 98(1) or (2), on behalf of an Australian beneficiary under a legal disability
  • set out the way in which the income of a non-resident trust estate is worked out and attributed to Australian beneficiaries [sections 531 to 600]
  • exempt from FIF taxation the beneficiary's and associates' interests in FIFs, foreign life assurance policies (FLPs) and resident public unit trusts which do not exceed $50,000 at the end of an income year [sections 96A and 515]
  • exempt an Australian beneficiary of a deceased estate from an interest charge on amounts that have been paid to or applied for the beneficiary's benefit within three years after the death of the person that gave rise to the estate [subsection 102AAM(1B)]
  • exempt a beneficiary from an interest charge on an amount received or applied for the beneficiary's benefit from a public unit trust as defined under the transferor trust measures and which was not a controlled foreign trust under the controlled foreign company (CFC) measures [subsection 102AAM(1C)]
  • exempt a taxpayer from an interest charge on the distribution of an amount that was paid to or applied for the benefit of the beneficiary and which was paid out of accumulated profits that relate to income
    • that is not eligible designated concession income of a listed country trust estate, or
    • that has been subjected to tax in any listed country. [sections 102AAE and 102AAM]

The listed countries are:

  • Canada
  • France
  • Germany
  • Japan
  • New Zealand
  • United Kingdom of Great Britain and Northern Ireland
  • United States.

[Section 320 of the ITAA 1936, subregulation 152C(1) and Schedule 10 of the Income Tax Regulations 1936, and section 141 (transitional provision) of the New International Tax Arrangements (Participation Exemption and Other Measures) Act 2004]