Taxation Determination
TD 93/193
Income tax: where a trustee is assessed under subsection 98(1) of the Income Tax Assessment Act 1936 and the income of the trust includes prescribed payments, are both the resident beneficiary of the trust who is under a legal disability, as well as the trustee, entitled to prescribed payments system (PPS) credits ?
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FOI status:
may be releasedFOI number: I 1216253| This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20). |
1. No, the PPS credit is offset against the trustee's assessment but not against the beneficiary's assessment.
2. By virtue of paragraph 221YHF(3)(b) the trustee is entitled to a PPS credit where the trustee is liable to be assessed under subsection 98(1).
3. The PPS credit is limited by subsection 221YHG(3) to the amount of the tax payable by the trustee in that year. Any excess may then be applied against the tax payable by the trustee in any other years, again limited to the amount of the tax payable.
4. In the circumstances outlined above, if a beneficiary derives other income and is required to include the trust distribution by virtue of subsection 100(1) there is no provision in the Act to offset the same credit against the assessment of the beneficiary. However, where a beneficiary is assessable under sub-section 100(1), subsection 100(2) entitles the beneficiary to a credit equal to the tax paid or payable by the trustee. Consequently the credit allowed to the beneficiary is not reduced by the PPS credit offset against the trustee's assessment.
EXAMPLE:
During the year ended 30 June 1993 the XYZ Trust derived a net profit of $10,000 and is entitled to a PPS credit of $2,000. The sole beneficiary " A " is presently entitled to the trust income, but as a minor, is under a legal disability. In addition to the entitlement to the trust distribution " A" derived $3,000 of interest during the year. All income is assessable under the provisions of Division 6AA.
TRUSTEE BENEFICIARY The XYZ Trust would be assessed as follows :- The beneficiary "A" would be assessed as follows:- Interest s25(1) $3,000 Trust distribution, s100(1) $10,000 Taxable income $10,000 Taxable Income $13,000 Tax Payable on $10,000 @ 47% $4,700 Tax Payable on $13,000 @ 47% $6,110 Less Less PPS credit para.221YHF(3)(b) $2,000 Section 100(2) credit $4,700 Net amount payable $2,700 Net amount payable $1410
Commissioner of Taxation
7/10/93
Previously issued as Draft TD 93/D124
References
ATO references:
NO BANTD 35
Related Rulings/Determinations:
IT 2125
Subject References:
beneficiaries;
prescribed payments;
trustee;
trusts
Legislative References:
ITAA 98(1),
ITAA 100(1),
ITAA 100(2),
ITAA 221YHF(3)(b),
ITAA 221YHG(3)
| Date: | Version: | Change: | |
| You are here | 7 October 1993 | Original ruling | |
| 1 November 2006 | Withdrawn |