ATO Interpretative Decision
ATO ID 2002/603
Income Tax
The 45 day holding period rule - discretionary trust beneficiariesFOI status: may be released
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Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Current
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Does section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) apply to imputation credits attached to Australian franked dividends being distributed to beneficiaries of a discretionary trust?
Decision
Yes, section 160APHO of the ITAA 1936 does apply to imputation credits attached to Australian franked dividends and as such, cannot be distributed to beneficiaries of a discretionary trust.
Facts
The trust is a discretionary trust where the beneficiaries have no fixed interest in the income or corpus of the trust. The trustee has not made a family trust election. The shares were purchased after 1 July 1997. The beneficiaries have each received more than $5000 in imputation credits. The trustee is a qualified person in relation to the dividend.
For the purposes of paragraph 160APHO(1)(a) of the ITAA 1936, neither the taxpayer nor an associate of the taxpayer has made, is under obligation to make, or is likely to make, a related payment in respect of a dividend as defined in section 160APHN of the ITAA.
Reasons for Decision
To be entitled to a franking credit, franking rebate, or intercorporate dividend rebate in relation to a particular dividend for the purposes of Division 1A of Part IIIAA of the ITAA 1936, a taxpayer must be a qualified person as defined in section 160APHD of the ITAA 1936. To be a qualified person, the beneficiaries must satisfy the requirements of subsection 160APHO(1) and paragraph 160APHO(2)(b) of the ITAA 1936.
The beneficiaries do not satisfy the requirements because they will not have held the shares for the required period, being at least 45 days for ordinary shares or 90 days for preference shares, as required by paragraph 160APHO(2)(b) of the ITAA 1936.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 17 June 2016 | After title | Inserted note regarding repealed section 160APHO of the ITAA 1936 |
| Related ATO Interpretative Decisions | Inserted related ATO IDs |
Legislative References:
Income Tax Assessment Act 1936
section 160APHD
section 160APHN
subsection 160 APHO(1)
paragraph 160 APHO(1)(a)
paragraph 160APHO(2)(b)
ATO ID 2002/602
ATO ID 2002/604
ATO ID 2003/1105
ATO ID 2003/1108
Keywords
Discretionary trusts
Imputation credits
Refund of imputation credits
ISSN: 1445-2782
| Date: | Version: | |
| 12 March 2002 | Original statement | |
| You are here → | 17 June 2016 | Updated statement |
| 19 December 2018 | Archived |