Post-balance date variances in member entitlements

'Unders' and 'overs' arise where net income and tax offset entitlement amounts reported to unit holders understate or overstate the amounts correctly determined under the law.

The existing trust income rules in Division 6 of the Income Tax Assessment Act 1936 make no provision for unders and overs adjustments. That is, Division 6 does not provide for amounts of over- or under-reported net income for an earlier year to be taken into account in a later year.

The new MIT rules have specific provisions for dealing with unders and overs of amounts attributed to members, allowing AMITs (and their members) to bring those under and over amounts to account in a later income year.

For MITs that choose to apply the new AMIT rules from 1 July 2015 or 1 July 2016, we will not generally apply compliance resources to specifically review prior-year under and over amounts.

For MITs that do not elect into the new rules from these dates, we expect trustees to advise unit holders of their net income entitlements based on the trust taxation rules set out in Division 6. However, while we reserve the right to focus on this issue in specific cases, it will not be a focus area in allocating compliance resources for income years ending before 1 July 2017.

From 1 July 2017, we will be monitoring the treatment of unders and overs by trusts not electing into the new rules and allocating compliance resources based on overall risk management principles.

    Last modified: 06 Oct 2016QC 47436