ATO Interpretative Decision
ATO ID 2004/162
Income Tax
Trusts: liability for Family Trust Distribution TaxFOI status: may be released
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the trustee of a family trust liable for Family Trust Distribution Tax (FTDT) pursuant to section 271-15 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) on a payment made in respect of the redemption of units, where the amount paid exceeds the value of any consideration given in return?
Decision
Yes. The trustee of a family trust is liable for FTDT pursuant to Division 271 of Schedule 2F to the ITAA 1936 to the extent that the payment made in respect of the redemption exceeds the value of any consideration given in return.
Facts
The trust is a unit trust. The trustee of the trust has made a Family Trust Election (FTE) which is in force. One of the unit holders is a superannuation fund.
The superannuation fund has not made an interposed entity election. The superannuation fund is not a member of the family group of the individual specified in the FTE of the unit trust pursuant to subsection 272-90(5) of Schedule 2F to the ITAA 1936.
The trustee of the unit trust redeemed all the units held by the superannuation fund, at a value which exceeds the market value of the units at the time of redemption.
The payment is not a distribution under section 272-45 of Schedule 2F to the ITAA 1936. The payment is a distribution of capital.
Reasons for Decision
The redemption of units in a unit trust would be a distribution pursuant to subsection 272-60(1) of Schedule 2F to the ITAA 1936. Section 272-60 gives an extended meaning of distributions of income and capital.
272-60(1) [Entity not covered]
A company, partnership or trust (an entity) also distributes income or capital to a person in circumstances not covered by section 272-45, 272-50 or 272-55 if it:
Limit on distributions
272-60(2)
However, subsection (1) only applies if, and to the extent that:
- (a)
- the amount paid, credited, reinvested or applied, the value of the property transferred, or the value of the other thing done;
exceeds:
- (b)
- the amount or value of any consideration given in return.
Subsection 272-60(2) of Schedule 2F to the ITAA 1936 limits the amount of the distribution on which FTDT is liable to be paid, to the amount that exceeds the amount or value of any consideration given in return. In this case the market value of the units at the time of the redemption is the amount regarded as being the value of any consideration.
The distribution, on which FTDT is liable, is the amount by which the amount paid for the redemption of the units exceeds the market value of those units.
Where the distribution is equal to or less than the market value of the units, there is no FTDT payable by the trustee of the trust on the distribution to the superannuation fund in relation to that redemption of units.
Amendment History
| Date of amendment | Part | Comment |
|---|---|---|
| 24 April 2014 | Issue | Remove reference to Division 271 of the ITAA 1936 and include section 271-15 of the ITAA 1936. |
| Legislative references | Remove reference to Division 271 of the ITAA 1936 and include section 271-15 of the ITAA 1936. | |
| Related ATO Interpretation Decisions | Remove Related ATO Interpretative Decisions and reference to ATO ID 2002/746. | |
| Keywords | Remove reference to Capital Gains Tax. |
Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
Schedule 2F, section 271-15
Schedule 2F, section 272-45
Schedule 2F, section 272-60
Schedule 2F, subsection 272-60(1)
Schedule 2F, subsection 272-60(2)
Schedule 2F, subsection 272-90(5)
Keywords
Family trusts
Trust losses
Unit trusts
Superannuation funds
Interposed entity election
Family trust distribution tax
Family trust election
Date reviewed: 6 February 2017
ISSN: 1445-2782
| Date: | Version: | |
| 30 May 2003 | Original statement | |
| You are here | 24 April 2014 | Updated statement |