Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 (53 of 2016)

Schedule 5   20% tracing rule and repeal of Division 6B

Part 4   Transitional

75   Transitional rule for 20% tracing requirement and repeal of Division 6B - imputation

(1) This item applies if at a time (the cessation time ), on or after the commencement of this Schedule, either:

(a) section 102K of the Income Tax Assessment Act 1936 ceases to apply to the trustee of a trust because of the repeal of that section by Part 2 of this Schedule; or

(b) section 102S of that Act ceases to apply to the trustee of a trust because of the amendment made by Part 1 of this Schedule.

(2) Subitem (3) applies if:

(a) an event happens in respect of the trust that is described in:

(i) the table in subsection 205-15(1) of the Income Tax Assessment Act 1997; or

(ii) the table in subsection 205-30(1) of that Act; and

(b) the event happens on or after the cessation time but before 1 July 2018; and

(c) the event is:

(i) the trust paying income tax for an income year starting before 1 July 2016; or

(ii) the trust paying a PAYG instalment in respect of income tax for an income year starting before 1 July 2016; or

(iii) the trust receiving a refund of income tax for an income year starting before 1 July 2016; or

(iv) the trust franking a distribution.

(3) For the purposes of determining whether a franking credit or franking debit arises in the trust's franking account as a result of the event:

(a) treat the trust as a corporate tax entity at the time the event happens; and

(b) treat the trust as satisfying the residency requirement in section 205-25 of the Income Tax Assessment Act 1997 for the income year in which the event happens.

(4) Subitem (5) applies if:

(a) the trust makes a distribution on or after the cessation time but before 1 July 2018; and

(b) the trust's franking account is in surplus just before the trust makes the distribution.

(5) For the purposes of determining whether the trust franks the distribution as a result of the event:

(a) treat the trust as a corporate tax entity at the time it makes the distribution; and

(b) treat the trust as satisfying the residency requirement in section 202-20 of the Income Tax Assessment Act 1997 at the time it makes the distribution.

Note: As a result, the trust will satisfy the requirement in paragraph 202-5(a) of that Act in respect of the distribution. If the other requirements in section 202-5 of that Act are satisfied in respect of the distribution, this means that the trust franks the distribution.