ATO Interpretative Decision
ATO ID 2004/245
Income Tax
Family trusts: family trust election - family control testFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Would a family trust election be in force for the whole of the income year (ended 30 June) if the family control test, pursuant to section 272-87 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936), is only passed from 1 January in the relevant income year?
Decision
No. In accordance with subsections 272-80(9) and 272-80(10) of Schedule 2F to the ITAA 1936, the family trust election is in force at all times after the time the trust passes the family control test.
Facts
The trustee of a non-fixed trust intends to lodge a family trust election, in accordance with section 272-80 of the Schedule 2F to the ITAA 1936, with the taxation return for the trust for the income year ended 30 June 2003.
The trust only passes the family control test pursuant to section 272-87 of Schedule 2F to the ITAA 1936 as from 1 January 2003.
Reasons for Decision
Section 272-80 of Schedule 2F to the ITAA 1936 provides for certain conditions that must be met when making a family trust election.
One of the conditions when making a family trust election is the trust must pass the family control test pursuant to section 272-87 of Schedule 2F to the ITAA 1936.
Subsection 272-80(4) of Schedule 2F to the ITAA 1936 states:
If the trust does not pass the family control test (see subsection 272-87) at the end of the specified income year, the trustee must not make the election.
The trustee of the trust may make a family trust election for the 2003 income year in accordance with section 272-80 of Schedule 2F to the ITAA 1936, as the trust passed the family control test pursuant to section 272-87 of Schedule 2F to the ITAA 1936 at the end of the specified income year (provided the other conditions for making a family trust election under section 272-80 of Schedule 2F to the ITAA 1936 are met).
In accordance with subsection 272-80(9) of Schedule 2F to the ITAA 1936, the election is in force at all times after the election commencement time, as specified by subsection 272-80(10) of Schedule 2F to the ITAA 1936, (and in the case of a fixed trust, until the time the election is revoked).
As the trust did not pass the family control test at all times in the income year specified, in accordance with paragraph 272-80(10)(a) of Schedule 2F to the ITAA 1936, the election commencement time is the earliest time from which the trust does pass the family control test for the remainder of that income year. As the trust passed the family control test pursuant to section 272-7 of Schedule 2F to the ITAA 1936 as from 1 January 2003, the family trust election is in force as at all times after this date until the time the election is revoked.
Date of decision: 2 March 2004Year of income: Year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1936
Schedule 2F
section 272-80
subsection 272-80(4)
subsection 272-80(9)
subsection 272-80(10)
paragraph 272-80(10)(a)
section 272-87
Keywords
Family control test
Family trust election
Family trusts
ISSN: 1445-2782
| Date: | Version: | |
| You are here → | 2 March 2004 | Original statement |
| 15 January 2010 | Archived |