House of Representatives

Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997

Family Trust Distribution Tax (Primary Liability) Bill 1997

Family Trust Distribution Tax (Primary Liability) Act 1998

Family Trust Distribution Tax (Secondary Liability) Bill 1997

Family Trust Distribution Tax (Secondary Liability) Act 1998

Medicare Levy Consequential Amendment (Trust Loss) Bill 1997

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)


These are deductions for bad debts and certain debt/equity swap deductions.


That is, deductions for bad debts under section 51 or 63, or sections 8-1 or 25-35 of the ITAA 1997, or debt/equity swap deductions under section 63E.


See Chapter 15 for an explanation of the transitional rules that apply if the year specified is prior to the 1997-98 income year.


Note that the trustee of a family trust is taken to beneficially hold a fixed entitlement as an individual (see subsection 272-30(2)).


The definition of family as contained in section 272-95 is effective from 7.30 pm (EST), 13 May 1997. Before that time a broader definition of family as contained in Item 25 of the Schedule applies (see Chapter 15).


But see paragraph 13.8.


This two month rule is affected by application provisions in subitems 13(5), 14(5) and 18(5) - see paragraph 15.7.


This two month rule is affected by application provisions in subitems 13(5), 14(5) and 18(5) - see paragraph 15.7.


This two month rule is affected by application provisions in subitems 13(5), 14(5) and 18(5) - see paragraph 15.7.


This two month rule is affected by application provisions in subitems 13(5), 14(5) and 18(5) - see paragraph 15.7.


The term 'breakdown in the marriage'' is defined in section 272-40 (see paragraph 13.100).


The term 'breakdown in the marriage'' is defined in section 272-40 (see paragraph 13.100).


Family trust distribution tax may also become payable under certain provisions relating to non-resident entities (see Chapter 12).


Tax under the Family Trust Distribution Tax (Secondary Liability) Act 1997 may become payable in some cases where non-resident entities are involved (see Chapter 12).


The term 'foreign superannuation fund' is defined in subsection 6(1) of the ITAA 1936.


If fixed entitlements are being traced for the purposes of determining whether a trust is a widely held unit trust, the fixed entitlement held by the fund or special company with more than fifty members or a government body is treated as though it is held by more than 20 individuals for their own benefit.


Payment of a dividend includes the crediting or distribution of the dividend (see the definition of 'paid' in subsection 6(1) of the Act).


For subitem 13(5) to apply to the 1996-97 income year, that year must end before the date of introduction of the Bill into the Parliament. For most trusts this will be the case. Only those trusts with a substituted accounting period ending after the date of introduction will not apply subitem 13(5) for the 1996-97 income year.


These relate to bad debt (including certain debt/equity swap) deductions.


The family control test is contained in section 272-87 and is discussed in paragraphs 5.28 to 5.32.


See Table 2 above.


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