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  • Attributing amounts to members

    A key objective of the attribution method is to ensure that members who invest in an AMIT are taxed on the trust income and other amounts in broadly the same way that they would have been taxed if they had held the assets of the AMIT directly.

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    Member component

    The trustee of the AMIT works out on a fair and reasonable basis how much of the determined trust component of a particular character should be attributed to each member, based on their membership interests in the trust. This is called the 'member component' of a particular character.

    Determined member component

    The trustee must then issue a statement to each member called an AMIT member annual (AMMA) statement, advising them how much of the particular character amounts have been attributed to them (the 'determined member component').

    Where you are a member of an AMIT, for each determined member component attributed to you, you are treated for tax purposes as though you had derived, received, made or paid that amount:

    • in your own right (rather than as a member of a trust), and
    • in the same circumstances as the AMIT derived, received, made or paid that amount, to the extent those circumstances give rise to the particular character.

    The income and tax offset amounts will keep the same tax characteristics as they had for the trustee, so you will be taxed on those amounts as if you had had derived, received, made or paid those amounts in your own right, rather than as a beneficiary of a trust – in effect, you are 'standing in the shoes' of the trustee, and the income and tax offset amounts retain their character once attributed to you.

    This means, for example, that your determined member components relating to assessable income will be used to determine your assessable income for the income year. This may be different from the amount you receive in actual cash payments.

    Fair and reasonable basis 

    The trustee must attribute amounts to members on a fair and reasonable basis that is consistent with constituent documents of the trust, such as the trust deed.

    An attribution will be considered to be fair and reasonable when:

    • the decision follows the constituent documents of the trust, and
    • it does not involve 'streaming' of amounts based on the tax characteristics of the member.

    Streaming based on the tax characteristics of a member does not necessarily occur because the attribution reflects the member's economic interests in the assets of the trust. Members can invest in particular classes within the trust that will best suit their tax profile, in which case the attribution will be based on their particular ownership interests rather than streamed to create a tax advantage.

    If the trustee does not include all of the assessable income or tax offsets of the AMIT (that is, all of the trust components) in determined member components attributed to members, the trustee will generally be taxed on any unattributed amounts.

    See also:

    Deemed payment

    When an AMIT that is a withholding MIT gives a member an AMMA statement, the trustee may also be deemed to have made a payment to the member.

    The amount of the deemed payment is relevant to working out the amount to be paid to us as non-resident withholding tax or TFN withholding tax.

    In general terms, the total deemed payment made by an AMIT is the total amount of the determined member components of an assessable income character as shown in the AMMA statements less the total of all AMIT dividends, interest and royalties (DIR) payments and fund payments that arose in relation to any actual payments made in relation to the income year (pre-AMMA actual payments). This amount reflects the amount that has been attributed to the members, which may be different from the amount of actual payments made to the members.

    To calculate the amount of deemed payment, the AMIT trustee must:

    1. work out the total deemed payment at the fund level (that is, the total of all the amounts of a character relating to assessable income attributed to all the members, less the total of all AMIT DIR payments or fund payments that arise from pre-AMMA actual payments)
    2. determine the amount of the deemed payment referable to each member on a fair and reasonable basis (whether a determination is fair and reasonable depends on the individual facts and circumstances)
    3. work out how much of the deemed payment is
      • an AMIT dividend payment
      • an AMIT interest payment
      • an AMIT royalty payment
      • a fund payment
      • an amount subject to the TFN withholding provisions.
       

    Where the withholding rules apply, the AMIT will need to pay an amount of tax to us for the deemed payment, equal to the amount it would be required to withhold if it were an actual payment. Non-resident withholding tax will generally not be payable if the deemed payment does not include an amount that is an AMIT dividend payment, an AMIT interest payment, an AMIT royalty payment or a fund payment. TFN withholding tax is not payable if the deemed payment does not include an amount subject to the TFN withholding provisions.

    Example 1A: Deemed payment calculated at the fund level not resulting in non-resident withholding tax

    Trustee C is the trustee of the AMIT C which is a withholding MIT. There are 100 members of AMIT C who each hold the same number of units of the same class carrying equal entitlements to income and capital.

    Table: Pre-AMMA actual payments in relation to the year

     

    First half distribution

    Second half distribution

    Total determined member components

    Interest (see note)

    Nil

    2,000

    2,000

    Dividends (see note)

    8,000

    Nil

    8,000

    Assessable foreign source income

    17,000

    23,000

    40,000

    Total distribution

    25,000

    25,000

    50,000

    Note: the amount subject to a requirement to withhold under Subdivision 12-F

    Trustee C therefore calculated the total deemed payments to be $40,000 as follows:

    Total determined member components

    50,000

    Less: Total AMIT DIR payments (2,000 + 8,000)

    10,000

    Deemed payment

    40,000

    Further, Trustee C calculates the deemed payment to be comprised entirely of foreign source income.

    Accordingly, Trustee C works out in relation to the deemed payment that there is a nil amount subject to non-resident withholding tax.

    Further TFN withholding tax is not payable in relation to the deemed payment, as the amount calculated as the deemed payment was included in the distributions made during the year.

    End of example

     

    Example 1B: No requirement to reconcile deemed payment at member level

    Assume the same facts as in Example 1A.

    Member A (resident in New Zealand) held one unit and received the first half distribution of $250 ($25,000 / 100 members of equal unit-holdings). Trustee C calculated that an AMIT dividend payment of $80 arose in relation to the payment and so withheld $12 from the distribution (ie $80 × 15%).

    Member A then sold the unit to Member B (an Australian resident) who received the distribution for the second half.

    The AMIT adopts the 'year-to-date' approach to calculate attribution to each member. Members are aware of this and it is part of the terms and conditions of the custody agreement. Accordingly the AMIT calculates the percentage annual allocation of each component as shown in the following table.

    Table: Annual component allocations

     

    Amount

    Percentage

    Interest

    2,000

    4%

    Dividends: unfranked amount declared to be CFI

    8,000

    16%

    Assessable foreign source income

    40,000

    80%

    Total distribution

    50,000

    100%

    Trustee C prepares AMMA statements for Member A and Member B with relevant extracts as shown in the following table.

    Table: Member A and Member B extracts

     

    Member A AMMA statement extract

    Member B AMMA statement extract

    Interest

    10

    10

    Dividends: unfranked amount declared to be CFI

    40

    40

    Assessable foreign source income

    200

    200

    Total distribution

    250

    250

    Trustee C therefore calculates the total deemed payments to be $40,000 as follows:

    Total determined member components

    50,000

    Less: Total AMIT DIR payments (2,000 + 8,000)

    10,000

    Deemed payment

    40,000

    Further, Trustee C calculates the deemed payment to be comprised entirely of foreign source income.

    Accordingly, Trustee C works out in relation to the deemed payment that there is a nil amount subject to non-resident withholding tax.

    Note that there is no requirement to reconcile the amount shown on each AMMA statement with amounts on which withholding tax has previously been calculated. For example, withholding tax on the interim distribution to Member A is based on the distribution comprising a nil amount of interest. Although the AMMA statement for Member A includes an amount of $10 as interest income, this does not result in a deemed payment of interest to Member A.

    End of example

     

    Example 1: Deemed payment calculated firstly at the fund level

    Trustee A is the trustee of the AMIT C which is a withholding MIT. There are 100 members of AMIT C who each hold the same number of units of the same class carrying equal entitlements to income and capital. Entity B is a foreign resident member of AMIT C.

    In a particular income year, AMIT C's total determined member components of a character relating to assessable income (unfranked dividends) is $50,000, and made total pre-AMMA actual payments of $20,000 prior to the issue of the AMMA.

    Trustee A works out the total deemed payment at the fund level by reducing the total determined member components of $50,000 by the total pre-AMMA actual payments of $20,000 (comprised entirely of unfranked dividends subject to non-resident withholding tax). The total deemed payment at the fund level is therefore $30,000.

    Trustee A then determines that the amount of the deemed payment taken to have been made to Entity B on a fair and reasonable basis is $300 ($30,000 / 100 members of equal unit-holdings).

    Trustee A issues an AMMA statement to Entity B for the amount of $500 ($50,000 / 100 members of equal unit-holdings) and pays an amount to the Commissioner which is equal to the amount that Trustee A would have been required to withhold if the deemed payment of $300 had been an actual payment.

    End of example

     

    Example 2: Attributing deemed payments on a fair and reasonable basis

    During the 2017 income year, AMIT D (which has 100 members and is a withholding MIT) had a parcel of 10,000 units held as follows:

    • At 31 December 2016 – 10,000 units held by Entity E, an Australian resident.
    • At 30 June 2017 – 10,000 units held by Entity F (as to 40%) and Entity G (as to 60%), both foreign residents.
    • At 31 December 2016, AMIT D calculated components of an assessable income character of $50,000. At 30 June 2017, AMIT D had total determined member components of $80,000 (ie a further $30,000 in the second half of the year). There were no pre-AMMA actual payments made for the income year. The total deemed payments at the fund level is therefore $80,000.

    Investors are aware that tax is allocated based on estimated assessable income attributable to unitholders at a particular date. Therefore, it is fair and reasonable for the trustee of AMIT D to determine that the amount of the deemed payment taken to have been made to its unitholders is as follows:

    • A deemed payment of $50,000 is referable to Entity E as he was the sole unitholder as at 31 December 2016. AMIT D issues an AMMA statement to Entity E for the amount of $50,000 and no withholding was required as Entity E is an Australian resident.
    • A deemed payment of $12,000 is referable to Entity F as she was the unitholder of 40% of the 10,000 units as at 30 June 2017. AMIT D issues an AMMA statement to Entity F for the amount of $12,000 and pays an amount to the Commissioner which is equal to the amount that AMIT D would have been required to withhold if the deemed payment had been an actual payment.
    • A deemed payment of $18,000 is referable to Entity G as he was the unitholder of 60% of the 10,000 units as at 30 June 2017. AMIT D issues an AMMA statement to Entity G for the amount of $18,000 and pays an amount to the Commissioner which is equal to the amount that AMIT D would have been required to withhold if the deemed payment had been an actual payment.
    End of example

     

    Example 3: Fair and reasonable to comply with the Constitution of the trust

    Assume the same facts as in Example 2, but instead assume that the constitution of AMIT D provides that any deemed fund payments under section 12A-205(2) of Schedule 1 to the Tax Administration Act 1953 is to be treated as being referable to the unitholders existing at the final record date of the income year to which the payment relates.

    It would be fair and reasonable for the trustee of AMIT D to determine that the amount of the total deemed payments of $80,000 is allocated in Entity F's AMMA statement as to $32,000 and in Entity G's AMMA statement as to $48,000. The allocation is based on the respective entitlements of Entity F and Entity G as at the final record date of the income year. No part of the deemed fund payment is allocated to Entity E as he was not a unitholder at the final record date of the income year.

    End of example

    See also:

    Annual Investment Income Report (AIIR)

    An AMIT reports the amounts attributed to members to us using an Annual Investment Income Report (AIIR). All AMITs are required to submit an AIIR, regardless of how many members are in the trust. We will use the AIIR as a record of the amount of income each member has been attributed by the trust.

    AMMA statement

    An AMIT has an obligation to give each member an attribution MIT member annual (AMMA) statement no later than three months after the end of the income year.

    The AMMA statement sets out the determined member components that an AMIT attributes to the member for that income year, that is the income and tax offset amounts attributed to the member. The member then uses the information in the AMMA statement to complete their own tax return. Essentially, the AMMA statement replaces the standard distribution statement provided by other types of investment trusts.

    While the AMMA statement is not required to be in a form approved by the ATO, it must contain certain information for the member, which includes:

    • the amount and character of each determined member component for the income year
    • amounts that affect the cost base of the member’s unit or interest in the AMIT (that is, the AMIT net cost base amount).

    If an AMIT fails to give an AMMA statement, the trustee may be liable to penalty.

      Last modified: 16 Aug 2018QC 47436