INCOME TAX ASSESSMENT ACT 1936

PART III - LIABILITY TO TAXATION  

Division 6 - Trust income  

SECTION 95AAA   95AAA   SIMPLIFIED OUTLINE OF THE RELATIONSHIP BETWEEN THIS DIVISION, DIVISION 6E AND SUBDIVISIONS 115-C AND 207-B OF THE INCOME TAX ASSESSMENT ACT 1997  


The following is a simplified outline of the relationship between this Division, Division 6E and Subdivisions 115-C and 207-B of the Income Tax Assessment Act 1997.

This Division sets out the basic income tax treatment of the net income of the trust estate. Generally:

  • (a) it has the result of assessing beneficiaries on a share of the net income of the trust estate based on their present entitlement to a share of the income of the trust estate; and
  • (b) it has the result of assessing the trustee directly on any residual net income; and
  • (c) as a collection mechanism, it has the result of assessing the trustee in respect of some beneficiaries, such as non-residents or those under a legal disability.
  • If the trust estate has capital gains, franked distributions or franking credits, this basic treatment is modified as described below.

    Division 6E modifies the operation of this Division for the purpose of excluding amounts relevant to capital gains, franked distributions and franking credits from the calculations of assessable amounts under sections 97, 98, 99, 99A and 100.

    Division 6E does not modify the operation of this Division (or any other provision of this Act) for any other purpose. For example:

  • (a) it does not modify the operation of this Division for the purposes of applying section 100A; and
  • (b) it does not modify amounts taxed in the hands of the trustee under Subdivisions 115-C and 207-B of the Income Tax Assessment Act 1997.
  • Subdivisions 115-C and 207-B of the Income Tax Assessment Act 1997 provide the corresponding taxation treatment for those capital gains, franked distributions and franking credits. Specifically:

  • (a) Subdivision 115-C of that Act has the effect that an amount corresponding to each of those capital gains is taxed in the hands of the beneficiaries of the trust (as a capital gain) and, if necessary, assessed to the trustee.
  • (b) Subdivision 207-B of that Act has the effect that an amount corresponding to each of those franked distributions is taxed in the hands of the beneficiaries of the trust and, if necessary, the trustee. It also has the effect that the entity in whose hands those distributions are taxed can take advantage of the relevant amount of related franking credits.

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