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ATO Interpretative Decision

ATO ID 2003/236 (Withdrawn)

Income Tax

Interposed Entity Elections: trust in respect of which the relevant Family Trust Election was made ceases to exist
FOI status: may be released
  • This ATO ID is withdrawn as the facts are affected by the insertion of subsection 272-85(5A) of Income Tax Assessment Act 1936 by Act 143 of 2007 with effect from 24 September 2007, applicable to the income year in which 24 September 2007 occurs and later income years.
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 an interposed entity election (IEE) still 'in force' if the trust in respect of which the relevant family trust election (FTE) was made ceases to exist?

Decision

Yes. Subsection 272-85(5) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) provides that an IEE is irrevocable.

Facts

The Discretionary Trust (D Trust) had a valid FTE in force just prior to the trust being vested.

Interposed Company (Inter Coy) had made an IEE which was in force so that it was a member of the family group of the primary individual specified in the FTE made by D Trust.

Reasons for Decision

Subsection 272-85(5) of Schedule 2F to the ITAA 1936 provides that an IEE is irrevocable. Therefore, the IEE made by Inter Coy will remain in force even though the D Trust has ceased to exist.

A family trust distribution tax liability will arise where the company makes a distribution outside the family group (see section 271-30 of Schedule 2F to the ITAA 1936).

Note that where a family trust is a fixed trust and it revokes its FTE in accordance with subsection 272-80(6) of Schedule 2F to the ITAA 1997, an IEE made in relation to that FTE in accordance with section 272-85 of Schedule 2F to the ITAA 1997 will remain in force.

Date of decision:  14 February 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   Schedule 2F
   section 271-30
   section 272-80
   subsection 272-80(1)
   subsection 272-80(9)
   section 272-85
   subsection 272-85(1)
   subsection 272-85(5)
   subsection 272-85(6)

Keywords
Family trust distribution tax
Family trust election
Family trusts
Interposed entity election
Trust loss tests

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  11 April 2003

ISSN: 1445-2782

history
  Date: Version:
  14 February 2003 Original statement
You are here 15 January 2010 Archived

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