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ATO Interpretative Decision

ATO ID 2002/1082

Income Tax

Interposed Entity Elections (IEE) - Multiple Elections
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Can an entity make an interposed entity election (IEE), under section 272-85 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936), in respect of two family trusts where the individual specified in the respective Family Trust Elections (FTE) are different?

Decision

No, an entity can not make an IEE, under section 272-85 of Schedule 2F to the ITAA 1936, in respect of two family trusts where the individual specified in the respective FTEs are different.

Facts

The Unit Trust wants to be interposed into the family groups of the X Family Trust and the Y Family Trust.

Both the X family and Y family trusts are non-fixed trusts that have made FTEs which are in force.

Each family trust has specified a different individual in their respective FTE.

Reasons for Decision

Subsection 272-85(7) of Schedule 2F to the ITAA 1936 places a restriction on the making of multiple elections. Subsection 272-85(7) of Schedule 2F to the ITAA 1936, states:

The company, partners or trustee must not make an election under this section that the company, partnership or trust is to be included in the family group of the individual specified in the family trust election in respect of more than one trust, unless the individual specified in each of the family trust elections is the same.

This restricts entities that are able to make an IEE to only making multiple elections into family trusts that have the same individual specified. An entity covered by an IEE can only belong in one family group for the purpose of subsection 272-90(4) of Schedule 2F to the ITAA 1936 based on the one specified individual. Therefore, the two family trusts cannot both interpose the Unit Trust into their respective family groups as each family trust has a different specified individual.

Date of decision:  14 June 2002

Year of income:  Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1936
   Schedule 2F, section 272-85
   Schedule 2F, subsection 272-85(7)
   Schedule 2F, section 272-90(4)

Keywords
Interposed entity election
Family Trust Election

Business Line:  Centres of Expertise Losses

Date of publication:  30 November 2002

ISSN: 1445-2782

history
  Date: Version:
You are here 14 June 2002 Original statement
  18 December 2009 Archived

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