ATO Interpretative Decision
ATO ID 2002/746
Income Tax
Trust - liability for Family Trust Distribution Tax on distribution to superannuation fundFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the trustee of a trust, which has made a family trust election, liable for Family Trust Distribution Tax under Division 271 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) on a distribution of income or capital to a superannuation fund that is not a member of the test individual's family group under section 272-90 of Schedule 2F to the ITAA 1936?
Decision
Yes. The trustee will have a liability for Family Trust Distribution Tax under Division 271 of Schedule 2F to the ITAA 1936 when the trust makes a distribution of income or capital to a superannuation fund that is not part of the family group of the test individual under section 272-90 of Schedule 2F to the ITAA 1936.
Facts
The trust is a unit trust and was established in 1996.
The superannuation fund owns (and has always owned) 100% of the issued units in the trust.
The superannuation fund is a complying superannuation fund with only two members, the test individual and their spouse.
The members of the superannuation fund do not have fixed entitlements to all the income and capital of the superannuation fund.
The superannuation fund has not made an interposed entity election.
Reasons for Decision
Family Trust Distribution Tax is imposed under section 271-15 of Schedule 2F to the ITAA 1936 where the trustee of a trust has made a family trust election (section 272-80 of Schedule 2F to the ITAA 1936) and (during the time when the election is in force) confers a present entitlement or distributes income or capital outside the family group of the individual specified in the family trust election.
The test individual's family group is defined in Section 272-90 of Schedule 2F to the ITAA 1936.
Subsection 272-90(4) of Schedule 2F to the ITAA 1936 states that a company, partnership or trust is a member of the test individual's family group in relation to the conferral or distribution if:
- (a)
- The trustee has made an interposed entity election to that effect; and
- (b)
- the election is in force when the conferral takes place or the distribution is made.
As the superannuation fund has not made an interposed entity election it does not come within the definition of family group member under subsection 272-90(4) of Schedule 2F to the ITAA 1936.
Subsection 272-90(5) of Schedule 2F to the ITAA 1936 states that a company, partnership or trust is a member of the test individual's family group in relation to the conferral or distribution if, when the conferral takes place or the distribution is made:
- (a)
- the test individual; or
- (b)
- one or more members of the test individual's family; or
- (c)
- the trustees of one or more family trusts, provided the test individual is specified in the family trust election of each of those family trusts;
or any combination of the above, have fixed entitlements directly or indirectly, and for their own benefit, to all of the income and capital of the company partnership or trust.
As the members of the superannuation fund do not have a fixed interest in all the income and capital of the superannuation fund it does not come within the definition of family group member under subsection 272-90(5) of Schedule 2F to the ITAA 1936.
Therefore the trustee of the family trust will be liable for Family Trust Distribution Tax on any distributions it makes to the superannuation fund under section 271-15 of Schedule 2F to the ITAA 1936.
Date of decision: 1 May 2002Year of income: Year ending 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
Schedule 2F, Division 271
Schedule 2F, section 271-15
Schedule 2F, section 272-80
Schedule 2F, section 272-90
Schedule 2F, subsection 272-90(4)
Schedule 2F, subsection 272-90(5)
ATO ID 2002/676
Keywords
Trusts
Superannuation funds
Interposed entity election
Family trust distribution tax
Family trust election
Fixed entitlements
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 1 May 2002 | Original statement |
| 15 January 2010 | Archived |