ATO Interpretative Decision
ATO ID 2003/798
Income Tax
Capital gains tax: CGT discount - discount capital gain distributed by public trading trust to unit holderFOI status: may be released
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This ID has been amended to include the fact that the trust has not made the choice to form a consolidated group and updated following amendments to Subdivision 115-C of the Income Tax Assessment Act 1997 introduced by the Tax Law Amendment (2011 Measures No. 5) Act 2011.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Will the taxpayer, an individual unit holder receiving a distribution from a public trading trust, that is attributable to a discount capital gain made by the trust, apply Subdivsion 115-C of the Income Tax Assessment Act 1997 (ITAA 1997) to the distribution?
Decision
No. The taxpayer will not apply Subdivision 115-C of the ITAA 1997 to the amount of the distribution attributable to the trust capital gain.
Facts
The unit trust is a public trading trust under section 102R of the Income Tax Assessment Act 1936 (ITAA 1936). The trust made a capital gain from the sale of shares that it acquired after 21 September 1999. The trust had owned the shares for more than 12 months at the time that it disposed of them.
The trust has not made a choice under section 703-50 of the ITAA 1997 to form a consolidated group. The trust was entitled to the 50% CGT discount for the discount capital gain in terms of subparagraph 115-100(b)(ii) of the ITAA 1997. The trustee distributed the capital gain to the unit holders in proportion to their unit holdings.
Reasons for Decision
Subdivision 115-C of the ITAA 1997 sets out the rules for dealing with the net income of a trust that has a capital gain. The rules treat parts of the net income attributable to capital gains included in the trust's net capital gain as capital gains made by beneficiaries specifically entitled to those gains or otherwise having a share of those gains.
Subsection 115-210(1) of the ITAA 1997 states that this Subdivision applies where a net capital gain is taken into account in calculating the trust's net income for the year. This subsection adopts the definition of 'net income' contained at subsection 95(1) of the ITAA 1936.
The net income of a public trading trust is determined in accordance with the definition in section 102M of the ITAA 1936.
As the public trading trust's 'net income' does not fall under that definition at subsection 95(1) of the ITAA 1936, the taxpayer cannot apply Subdivision 115-C of the ITAA 1997 to the amount of the distribution attributable to the trust capital gain.
Date of decision: 22 August 2003Year of income: Year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1936
section 95(1)
section 102M
section 102R
Subdivision 115-C
subparagraph 115-100(b)(ii)
subsection 115-210(1)
section 703-50 Related ATO Interpretative Decisions
ATO ID 2003/652
ATO ID 2003/652
Keywords
Capital gains tax
CGT 50% individual discount
CGT discount
CGT trust distribution
Consolidated group
Consolidation
Net capital gain
Net income of a trust
Public trading trusts
Unit trust distributions
Unitholders
ISSN: 1445-2782