ATO Interpretative Decision
ATO ID 2003/455 (Withdrawn)
Income Tax
CGT small business concessions: controlling individual - unit trust with discretionary trust unit holderFOI status: may be released
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This ATO Interpretative Decision is withdrawn from the database because it contains a view in respect of a provision of the Income Tax Assessment Act 1997 that doesn't apply after the 2005-06 income year. Despite its withdrawal from the database, this ATO Interpretative Decision continues to be a precedential view in respect of decisions for income years up to, and including, the 2005-06 income year.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 26 February 2010
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a unit trust have a 'controlling individual' under subsection 152-55(2) of the Income Tax Assessment Act 1997 (ITAA 1997) if the only unit holder is a discretionary trust and the trustees of the discretionary trust have exercised their discretion to distribute at least 50% of the income and the capital of the discretionary trust to a particular individual?
Decision
No. A unit trust does not have a 'controlling individual' under subsection 152-55(2) of the ITAA 1997 if the only unit holder is a discretionary trust and the trustees of the discretionary trust have exercised their discretion to distribute at least 50% of the income and the capital of the discretionary trust to a particular individual.
Facts
A unit trust carries on a business and its only unit holder is a discretionary trust.
The trustees of the discretionary trust have exercised their discretion to distribute at least 50% of the income and the capital of the discretionary trust for a particular year to a particular individual.
Reasons for Decision
Under subsection 152-55(2) of the ITAA 1997 an individual is a 'controlling individual' of a trust (where entities have entitlements to all the income and capital of the trust) if the individual is beneficially entitled to at least 50% of the income and capital of the trust. This requires a fixed and continuous entitlement to the income and capital of the trust, rather than just an entitlement in respect of a given distribution of income or capital.
In this case, the unit trust does not have any individual unit holders. As well, the discretion exercised by the trustees of the discretionary trust in favour of a particular individual in relation to a particular period or distribution, does not alter the fact that that individual does not have a fixed and continuous entitlement to the income and capital of the unit trust.
As such, notwithstanding the exercise of the discretion, there is no individual beneficially entitled to at least 50% of the income and capital of the unit trust. In these circumstances, the unit trust does not have a 'controlling individual' under subsection 152-55(2) of the ITAA 1997.
Date of decision: 15 May 2003Year of income: Year ending 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
subsection 152-55(2)
Keywords
Capital gains
CGT small business relief
Small business retirement exemption
Controlling individual test
ISSN: 1445-2782
| Date: | Version: | |
| 15 May 2003 | Original statement | |
| You are here → | 26 February 2010 | Archived |