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ATO Interpretative Decision

ATO ID 2002/1071

Income Tax

Trust with Nil net income - refund of imputation credits.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is a discretionary trust, with a nil net income or net loss for an income year ending on or after 1 July 2000 and before 22 May 2001, entitled to a refund of excess imputation credits on dividends paid on or after 1 July 2000 under Division 67 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. A discretionary trust with a nil net income or a net loss is not entitled to a refund of excess imputation credits under Division 67 of the ITAA 1997.

Facts

A discretionary trust has nil net income or a net loss for an income year ending on or after 1 July 2000 and before 22 May 2001.

The trust receives franked dividend income with franking credits.

Reasons for Decision

Division 67 of the ITAA 1997 deals with the refunding of excess imputation credits.

Taxpayers eligible for the refund are resident:

•
Individuals;
•
trustees liable to be assessed under section 98 or 99 (but not 99A) of the Income Tax Assessment Act 1936 (ITAA 1936);
•
superannuation funds;
•
approved deposit funds;
•
life assurance companies (in respect of their superannuation business);
•
registered organisations (in respect of their superannuation business);
•
pooled superannuation trusts; and
•
certain registered charitable and gift deductible organisations.

Subsection 67-25(1) of the ITAA 1997 makes it clear that trustees entitled to a franking credit under section 160AQY of the ITAA 1936 can only receive a refund of any excess imputation credits if they are liable to be assessed under section 98 or 99 of the ITAA 1936. In the case of a discretionary trust with no net income or a net loss there is no liability to such an assessment. The excess imputation credits are not refundable where a trustee of a discretionary trust is assessed under section 99A of the ITAA 1936.

(Note: amendment omitting section 98 from subsection 67-25(1) received Royal Assent on 3 July 2002 and applies to assessments for income years ending on or after 22 May 2001).

Date of decision:  16 September 2002

Legislative References:
Income Tax Assessment Act 1997
   Division 67
   section 67-25
   subsection 67-25(1)

Income Tax Assessment Act 1936
   section 98
   section 99
   section 99A
   section 160AQY

Related ATO Interpretative Decisions
ATO ID 2002/1070

ATO Interpretative Decisions overturned by this decision
ATO ID 2001/293 (Amendment to Legislation)

Keywords
Trusts
Discretionary trusts
Precedent
Refund of imputation credits

Business Line:  Office of the Chief Tax Counsel

Date of publication:  28 November 2002

ISSN: 1445-2782

history
  Date: Version:
You are here 16 September 2002 Original statement
  13 March 2012 Archived

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