ATO Interpretative Decision

ATO ID 2012/12 (Withdrawn)

Income Tax

Trust Losses: whether the writing off of a trade debt by a trustee constitutes a distribution to the debtor
FOI status: may be released
  • This ATO ID has been withdrawn as the view stated in this ATO ID is no longer current. The current ATO view on this issue is contained in TD 2017/D1, which expresses the view that the extended meaning of 'distribution' in section 272-60 of Schedule 2F to the Income Tax Assessment Act 1936 does apply to a person who is not a beneficiary of the trust.
    This document has changed over time. View its history.

Status of this decision: Decision withdrawn 8 June 2017.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the extended meaning of 'distribution' in section 272-60 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) apply to trade debts written-off by a trustee where the debtor is not a beneficiary of the trust?

Decision

No. The extended meaning of distribution in section 272-60 of Schedule 2F to the ITAA 1936 only applies in relation to a person in their capacity as a beneficiary of the trust.

Facts

A trust which has made a family trust election operates as a trading trust and writes-off a trade debt owed by a person who is not a beneficiary of the trust nor are they associated with any beneficiary of the trust.

Reasons for Decision

A trustee distributes income or capital to a person in their capacity as a beneficiary of the trust pursuant to section 272-45 of Schedule 2F to the ITAA 1936.

Section 272-60 of Schedule 2F to the ITAA 1936 provides an extended definition of 'distribution'. However, in relation to a trust, this provision only applies in relation to the things specified in paragraphs 272-60(1)(a) to 272-60(1)(e) of the ITAA 1936 to the extent that they arise in a person's capacity as a beneficiary of the trust.

Writing off a trade debt owed by a person who is not a beneficiary of the trust would not come under consideration as a distribution of income or capital under section 272-60 of Schedule 2F to the ITAA 1936.

Date of decision:  23 February 2012

Year of income:  Year ended 30 June 2012

Legislative References:
Income Tax Assessment Act 1936
   Schedule 2F
   section 272-45
   section 272-60
   paragraph 272-60(1)(a)
   paragraph 272-60(1)(b)
   paragraph 272-60(1)(c)
   paragraph 272-60(1)(d)
   paragraph 272-60(1)(e)

Keywords
Debt
Family trust election
Trading trust
Trust beneficiaries
Trust distribution

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  2 March 2012

ISSN: 1445-2782

history
  Date: Version:
  23 February 2012 Original statement
You are here 8 June 2017 Withdrawn