Tax Laws Amendment (2010 Measures No. 2) Act 2010 (75 of 2010)

Schedule 2   Extending the TFN withholding arrangements to closely held trusts, including family trusts

Part 1   Main amendments

Taxation Administration Act 1953

5   After section 12-170 in Schedule 1

Insert:

Payment of income of closely held trust where TFN not quoted

12-175 Trustee distributes income of closely held trust

Scope

(1) This section applies if:

(a) the trustee of a trust makes a distribution to a beneficiary of the trust at a time (the distribution time ) during an income year of the trust; and

(b) some or all of the distribution is from the *ordinary income or *statutory income of the trust; and

(c) the trust is:

(i) a resident trust estate (within the meaning of subsection 95(2) of the Income Tax Assessment Act 1936) in relation to the income year; and

(ii) a closely held trust (within the meaning of section 102UC of that Act, disregarding paragraphs (c), (d) and (e) of the definition of excluded trust in subsection (4) of that section); and

(iii) not prescribed by the regulations for the purposes of this subparagraph; and

(d) the beneficiary is:

(i) an Australian resident; and

(ii) not an *exempt entity; and

(iii) not under a legal disability for the purposes of section 98 of that Act.

Trustee must withhold

(2) The trustee must withhold an amount from the distribution, if:

(a) the beneficiary did not *quote the beneficiary's *tax file number to the trustee before the distribution time; and

(b) the trustee is not liable to pay tax under section 98 of the Income Tax Assessment Act 1936 in connection with the distribution; and

(c) the trustee is not required to make a correct TB statement under Division 6D of Part III of that Act (about trustee beneficiary non-disclosure tax) in connection with the distribution; and

(d) family trust distribution tax is not payable under Schedule 2F to that Act in connection with the distribution.

Note 1: If the trust is a unit trust, the trustee may be required to withhold under section 12-140 in priority to this section: see section 12-5.

Note 2: The trustee commits an offence if the trustee fails to withhold an amount as required by this section: see section 16-25.

Application of rest of Part

(3) If the distribution is not a payment, this Part applies as if the trustee paid the amount of the distribution to the beneficiary at the distribution time.

Trust income of earlier income years

(4) Subsections (2) and (3) do not apply to the distribution, to the extent that:

(a) the beneficiary is presently entitled, for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936, to a share of the income of the trust of an earlier income year; and

(b) the distribution is a distribution of some or all of that share.

Note: The trustee may have been required to withhold from that share under section 12-180.

12-180 Beneficiary becomes presently entitled to income of closely held trust

Scope

(1) This section applies if:

(a) at the end of an income year of a trust, a beneficiary of the trust is presently entitled, for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936, to a share of the income of the trust of that year; and

(b) paragraph 12-175(1)(c) in this Schedule applies to the trustee of the trust; and

(c) paragraph 12-175(1)(d) applies to the beneficiary.

Trustee must withhold

(2) The trustee must withhold an amount from that share of the *net income of the trust, if:

(a) the beneficiary did not *quote the beneficiary's *tax file number to the trustee before the end of the year; and

(b) the trustee is not liable to pay tax in respect of that share under section 98 of the Income Tax Assessment Act 1936; and

(c) the trustee is not required to make a correct TB statement about that share under Division 6D of Part III of that Act (about trustee beneficiary non-disclosure tax); and

(d) family trust distribution tax is not payable on that share of the income of the trust under Schedule 2F to that Act.

Note 1: If the trust is a unit trust, the trustee may be required to withhold under section 12-145 in priority to this section: see section 12-5.

Note 2: The trustee commits an offence if the trustee fails to withhold an amount as required by this section: see section 16-25.

Application of rest of Part

(3) This Part (other than section 12-175) applies as if the trustee had paid that share of the *net income of the trust to the beneficiary at the end of the income year.

Entitlements already paid

(4) Subsections (2) and (3) do not apply to that share of the *net income of the trust to the extent that the trustee distributed any of that share to the beneficiary during the income year.

Note: The trustee may have been required to withhold from that distribution under section 12-175.

Trusts that end during the year

(5) This section applies as if each reference to the end of an income year were a reference to the time occurring just before the trust ends, if the trust ends during the income year.

12-185 Exception for payments below thresholds set by regulations

(1) Section 12-175 or 12-180 does not require an amount to be withheld if the payment (including the payment mentioned in subsection 12-180(3)) is less than the amount worked out under the regulations.

(2) Regulations made for the purposes of this section may deal differently with different payments.