Income Tax Assessment Act 1936
SCHEDULE 2
1. All that portion of the mainland of Australia lying south of the southern boundary of Zone A and north of a line commencing at the northeastern corner of the shire of Broadsound in the State of Queensland thence generally westerly and southerly by the boundaries dividing the Shires of Broadsound Belyando Jericho Bauhinia Booringa and Balonne from the Shires of Sarina Nebo Wangaratta Dalrymple Aramac Barcaldine Blackall Tambo Murweh and Paroo to the boundary dividing the States of Queensland and New South Wales thence east by that boundary to its junction with the Barwon River at the northeastern corner of the Western Division in the State of New South Wales thence generally southwesterly by part of the boundary dividing the Central and Western Divisions of the State of New South Wales to the northernmost corner of the County of Mouramba and by the boundaries dividing the Counties of Mouramba Mossgiel Waljeers Kilfera Taila Wentworth and Tara from the Counties of Robinson Booroondarra Woore Manara Perry and Windeyer to the boundary dividing the States of New South Wales and South Australia thence south by that boundary to the northeast corner of the County of Hamley in the State of South Australia thence by the north boundaries of the Counties of Hamley and Young part of the north boundary of the County of Burra part of the east boundary of the District Council District of Hallett the east and a north boundary of the District Council District of Peterborough east and north boundaries of the District Council District of Carrieton to the southeast corner of the District Council District of Hawker the eastern north and west boundaries of that District Council District a western boundary of the District Council District of Kanyaka to the north boundary of the County of Frome thence west by part of that boundary and its prolongation west to the west boundary of the County of Manchester thence by the boundaries dividing the Counties of Manchester York and Buxton from the County of Hore-Ruthven part of the west boundary of the County of Buxton and part of the western boundary of the District Council District of Kimba to the easternmost corner of the District Council District of Le Hunte thence generally northwesterly by the east and north boundaries of the District Council Districts of Le Hunte and Streaky Bay and the east north and west boundaries of the District Council District of Murat Bay to the southern coastline thence by that coastline westerly to the southwestern corner of the Road District of Phillips River in the State of Western Australia thence generally northwesterly by the boundaries dividing the Road Districts of Gnowangerup Kent Lake Grace Kulin Kondinin Narembeen Merredin and Nungarin from the Road Districts of Phillips River Yilgarn and Westonia to the northeast corner of the Road District of Nungarin thence westerly and northwesterly by the boundaries dividing the Road Districts of Nungarin Kununoppin-Trayning Wyalkatchem Dowerin and Wongan-Ballidu from the Road Districts of Mukinbudin Mt Marshall Koorda and Dalwallinu to the No. 2 rabbit proof fence by that fence to the north boundary of the Road District of Perenjori and thence by the boundaries dividing the Road Districts of Perenjori Morawa Mingenew Irwin Greenough and Geraldton from the Road Districts of Yalgoo Mullewa and Upper Chapman to the western coastline.
2. All that portion of Tasmania lying south and west of a line commencing on the west coast at the southwest corner of the County of Wellington and thence generally easterly and southerly by the boundaries dividing the counties of Wellington Devon and Westmorland from the counties of Russell Lincoln and Cumberland to the point on the River Shannon where the hydro-electric transmission line from Waddamana to Launceston crosses that river thence in a straight line in a general southwesterly direction to the trigonometrical station known as Fishers Sugar Loaf thence by a straight line in a general southwesterly direction to the point where the Lyell Highway crosses the Dee River thence by a straight line in a general southwesterly direction to the confluence of the Derwent and Florentine Rivers thence by a straight line in a general southerly direction passing through the trigonometrical station on South East Cape to the southern coastline.
3. All the islands forming part of Australia lying adjacent to the coastline of either of the portions of Australia described in paragraphs 1 and 2.
4. King Island, Tasmania.
5. All the islands in the group of islands known as the Furneaux Group, Tasmania.
FORMER SCHEDULE 2C
-
FORGIVENESS OF COMMERCIAL DEBTS
SECTION 245-215 UNAPPLIED TOTAL NET FORGIVEN AMOUNT OF A PARTNERSHIP TO BE TRANSFERRED TO PARTNERS
245-215(1)
This section has effect in relation to a partnership irrespective of any agreement between the partners as to the operation of this section.
245-215(2)
This section applies if any part (the residual amount ) of the total net forgiven amount in relation to a partnership in respect of the forgiveness year of income remains after the total net forgiven amount has been applied in accordance with Subdivision 245-E .
245-215(3)
If there is a net income in relation to the partnership in respect of the forgiveness year of income, each partner is taken to have had a debt forgiven during the forgiveness year of income and there is taken to be, in respect of the debt of each partner, a net forgiven amount worked out in accordance with the following formula:
245-215(4)
If there is a partnership loss in relation to the partnership in respect of the forgiveness year of income, each partner is taken to have had a debt forgiven during the forgiveness year of income and there is taken to be, in respect of the debt of each partner, a net forgiven amount worked out in accordance with the following formula:
245-215(5)
In the formulas in subsections (3) and (4):
245-215(6)
The total net forgiven amount of a partner for the forgiveness year of income as worked out under subsection 245-105(1) includes the net forgiven amount worked out in relation to the partner under this section.
Guide to Subdivision 245-G
SECTION 245-220 WHAT THIS SUBDIVISION IS ABOUT
SECTION 245-221 MAP OF THIS SUBDIVISION
Operative provisions
SECTION 245-225 APPLICATION OF SUBDIVISION
245-225(1)
This Subdivision applies in respect of a debt (the relevant debt ) incurred by a company (the debtor company ) if, and only if:
(a) the relevant debt has been forgiven; and
(b) there is a net forgiven amount in respect of the relevant debt; and
(c) the debtor company and another company or other companies constitute a group of related companies in respect of the relevant debt.
245-225(2)
The debtor company and another company or other companies constitute a group of related companies in respect of the relevant debt for the purposes of this section if the companies concerned were under common ownership:
(a) at the time when the relevant debt was forgiven; and
(b) at any time on the last day of the year of income that immediately preceded the forgiveness year of income in respect of the relevant debt.
245-225(3)
If:
(a) the debtor company and another company were not under common ownership at the times mentioned in subsection (2); and
(b) the 2 companies had been under common ownership at any time within:
(c) a taxpayer who was a controller of the other company immediately before, and immediately after, the 2 companies ceased to be under common ownership was also:
(d) immediately before, and immediately after, the 2 companies ceased to be under common ownership and at the time when the relevant debt was forgiven:
SECTION 245-230 IF ANY NON-DEBTOR COMPANIES IN A GROUP OF RELATED COMPANIES HAVE DEDUCTIBLE REVENUE LOSSES
245-230(1)
This section applies in relation to the relevant debt if, and only if, any one or more of the non-debtor companies in the group of related companies in respect of the relevant debt have deductible revenue losses for the purposes of the application of this Division in relation to the forgiveness year of income in respect of the relevant debt (the relevant year of income ).
245-230(2)
The net forgiven amount of the relevant debt (the disregarded net forgiven amount ) is disregarded for the purposes of this Division other than this Subdivision.
245-230(3)
However, each company in the group that has deductible revenue losses for the purposes mentioned in subsection (1) (including the debtor company if it has deductible revenue losses for those purposes) is taken to have had a debt forgiven during the relevant year of income and there is taken to be, in respect of each such debt, a net forgiven amount worked out in accordance with the following formula:
245-230(4)
In this section:
SECTION 245-235 IF ANY NON-DEBTOR COMPANIES IN A GROUP OF RELATED COMPANIES HAVE DEDUCTIBLE NET CAPITAL LOSSES
245-235(1)
This section applies in relation to the relevant debt if, and only if, for the purposes of the application of this Division in relation to the forgiveness year of income in respect of the relevant debt (the relevant year of income ):
(a) none of the companies in the group of related companies in respect of the relevant debt have deductible revenue losses; but
(b) any one or more of the non-debtor companies in the group of related companies in respect of the relevant debt have deductible net capital losses.
245-235(2)
The net forgiven amount of the relevant debt (the disregarded net forgiven amount ) is disregarded for the purposes of this Division other than this Subdivision.
245-235(3)
However, each company in the group that has deductible net capital losses for the purposes mentioned in subsection (1) (including the debtor company if it has deductible net capital losses for those purposes) is taken to have had a debt forgiven during the relevant year of income and there is taken to be, in respect of each such debt, a net forgiven amount worked out in accordance with the following formula:
SECTION 245-240 IF NEITHER SECTION 245-230 NOR 245-235 APPLIES
245-240
If neither section 245-230 nor 245-235 applies in respect of the relevant debt, this Subdivision does not affect the application of the preceding Subdivisions in relation to the net forgiven amount of the debt.
SECTION 245-245 DEFINITIONS
245-245(1)
In this Division, unless the contrary intention appears:
245-245(2)
In determining for the purposes of this Division whether a non-debtor company in a group of companies that are related companies in respect of a debt has a deductible revenue loss or a deductible net capital loss , the relevant definitions of those expressions as set out in sections 245-110 and 245-125 , respectively, are to be applied as if the company were the debtor company.
SECTION 245-250 COMPANIES UNDER COMMON OWNERSHIP
245-250
For the purposes of this Division, the question whether 2 companies were under common ownership at a particular time is to be determined in the same way as that question would be determined under the definition of under common ownership in subsection 995-1(1) of the Income Tax Assessment Act 1997 .
SECTION 245-255 CONTROLLER OF COMPANY
245-255
For the purposes of this Division, the question whether a taxpayer was a controller of a company at a particular time is to be determined in the same way as the question whether an entity is a controller (for CGT purposes) of a company is determined under section 140-20 of the Income Tax Assessment Act 1997 .
SECTION 245-260 TIME OF INCURRING DEBT
245-260(1)
Subject to subsection (2), if a debt resulted from the debtor's drawing from time to time on an established line of credit, the debt is taken, for the purposes of this Division, to have been incurred at the time when the debtor first drew on the line of credit.
245-260(2)
If, at any time after a debtor made a drawing or drawings on a line of credit, the debtor repaid the only previous drawing or all the previous drawings, as the case may be, the reference in subsection (1) to the time when the debtor first drew on the line of credit is taken to be a reference to the time of the first drawing after the repayment.
SECTION 245-265 KEEPING AND RETENTION OF RECORDS
245-265(1)
A person (the debtor ) who incurs a commercial debt must keep any records that are necessary to enable the following matters to be readily found out:
(a) the date on which the debt was incurred;
(b) the identity of the creditor;
(c) the amount of the debt;
(d) the terms of repayment of the debt;
(e) if the debt is not a moneylending debt and the debtor and the creditor were not dealing with each other at arm's length in respect of the incurring of the debt - the debtor's capacity at the time when the debt was incurred to pay the debt when it falls due;
(f) if the debtor's obligation to pay the debt is forgiven - the date of the forgiveness and the consideration (if any) in respect of the forgiveness.
245-265(2)
If a company and another company that are under common ownership cease to be under common ownership, each company must keep any records that are necessary to enable the following matters to be readily found out:
(a) the date on which the companies ceased to be under common ownership;
(b) the identity of each person who was a controller of the company immediately before the companies ceased to be under common ownership;
(c)the identity of each person who was a controller of the company immediately after the companies ceased to be under common ownership.
245-265(3)
A person who is required by subsection (1) or (2) to keep records must keep them in writing in the English language or so as to enable them to be readily accessible and convertible into writing in the English language.
245-265(4)
Subject to subsection (5), a person who keeps any records, relating to a debt incurred by the person, as required by subsection (1) must retain the records until:
(a) if paragraph (b) does not apply - the end of 5 years after the debt was forgiven; or
(b) if the period (the assessment period ) within which the Commissioner may, under section 170 , amend an assessment in respect of the person's income of the year of income to which the records relate, or in which a transaction or act to which the records relate was completed, is extended under subsection 170(7) :
245-265(5)
Subsection (4) does not require records in respect of a debt that has been wholly paid in cash to be retained after the debt was so paid.
245-265(6)
Subject to subsection (7), each company referred to in subsection (2) that keeps any records relating to the company as required by subsection (2) must retain the records until the end of the second year of income after the year of income in which the company and the other company referred to in subsection (2) ceased to be under common ownership.
245-265(7)
If a debt of one of the companies referred to in subsection (2) was forgiven at any time after the companies ceased to be under common ownership and before the end of the second year of income after the year of income in which the cessation occurred, each of the companies that keeps any records relating to the company as required by that subsection must retain the records until:
(a) if paragraph (b) does not apply - the end of 5 years after the debt was forgiven; or
(b) if the period (the assessment period ) within which the Commissioner may, under section 170 , amend an assessment in respect of the company's income of the year of income to which the records relate, or in which a transaction or act to which the records relate was completed, is extended under subsection 170(7) :
245-265(8)
A person who contravenes a provision of this section is guilty of an offence punishable on conviction by a penalty of not more than 30 penalty units.
245-265(8A)
Subsection (8) does not apply to the extent that the person has a reasonable excuse.
245-265(9)
This section does not limit the application of any other provision of this Act relating to the keeping or retention of records.
View history note
Hide history noteSection 79A
PART II Zone B
1. All that portion of the mainland of Australia lying south of the southern boundary of Zone A and north of a line commencing at the northeastern corner of the shire of Broadsound in the State of Queensland thence generally westerly and southerly by the boundaries dividing the Shires of Broadsound Belyando Jericho Bauhinia Booringa and Balonne from the Shires of Sarina Nebo Wangaratta Dalrymple Aramac Barcaldine Blackall Tambo Murweh and Paroo to the boundary dividing the States of Queensland and New South Wales thence east by that boundary to its junction with the Barwon River at the northeastern corner of the Western Division in the State of New South Wales thence generally southwesterly by part of the boundary dividing the Central and Western Divisions of the State of New South Wales to the northernmost corner of the County of Mouramba and by the boundaries dividing the Counties of Mouramba Mossgiel Waljeers Kilfera Taila Wentworth and Tara from the Counties of Robinson Booroondarra Woore Manara Perry and Windeyer to the boundary dividing the States of New South Wales and South Australia thence south by that boundary to the northeast corner of the County of Hamley in the State of South Australia thence by the north boundaries of the Counties of Hamley and Young part of the north boundary of the County of Burra part of the east boundary of the District Council District of Hallett the east and a north boundary of the District Council District of Peterborough east and north boundaries of the District Council District of Carrieton to the southeast corner of the District Council District of Hawker the eastern north and west boundaries of that District Council District a western boundary of the District Council District of Kanyaka to the north boundary of the County of Frome thence west by part of that boundary and its prolongation west to the west boundary of the County of Manchester thence by the boundaries dividing the Counties of Manchester York and Buxton from the County of Hore-Ruthven part of the west boundary of the County of Buxton and part of the western boundary of the District Council District of Kimba to the easternmost corner of the District Council District of Le Hunte thence generally northwesterly by the east and north boundaries of the District Council Districts of Le Hunte and Streaky Bay and the east north and west boundaries of the District Council District of Murat Bay to the southern coastline thence by that coastline westerly to the southwestern corner of the Road District of Phillips River in the State of Western Australia thence generally northwesterly by the boundaries dividing the Road Districts of Gnowangerup Kent Lake Grace Kulin Kondinin Narembeen Merredin and Nungarin from the Road Districts of Phillips River Yilgarn and Westonia to the northeast corner of the Road District of Nungarin thence westerly and northwesterly by the boundaries dividing the Road Districts of Nungarin Kununoppin-Trayning Wyalkatchem Dowerin and Wongan-Ballidu from the Road Districts of Mukinbudin Mt Marshall Koorda and Dalwallinu to the No. 2 rabbit proof fence by that fence to the north boundary of the Road District of Perenjori and thence by the boundaries dividing the Road Districts of Perenjori Morawa Mingenew Irwin Greenough and Geraldton from the Road Districts of Yalgoo Mullewa and Upper Chapman to the western coastline.
2. All that portion of Tasmania lying south and west of a line commencing on the west coast at the southwest corner of the County of Wellington and thence generally easterly and southerly by the boundaries dividing the counties of Wellington Devon and Westmorland from the counties of Russell Lincoln and Cumberland to the point on the River Shannon where the hydro-electric transmission line from Waddamana to Launceston crosses that river thence in a straight line in a general southwesterly direction to the trigonometrical station known as Fishers Sugar Loaf thence by a straight line in a general southwesterly direction to the point where the Lyell Highway crosses the Dee River thence by a straight line in a general southwesterly direction to the confluence of the Derwent and Florentine Rivers thence by a straight line in a general southerly direction passing through the trigonometrical station on South East Cape to the southern coastline.
3. All the islands forming part of Australia lying adjacent to the coastline of either of the portions of Australia described in paragraphs 1 and 2.
4. King Island, Tasmania.
5. All the islands in the group of islands known as the Furneaux Group, Tasmania.
(Repealed by No 79 of 2010)
245-215(1)
This section has effect in relation to a partnership irrespective of any agreement between the partners as to the operation of this section.
245-215(2)
This section applies if any part (the residual amount ) of the total net forgiven amount in relation to a partnership in respect of the forgiveness year of income remains after the total net forgiven amount has been applied in accordance with Subdivision 245-E .
245-215(3)
If there is a net income in relation to the partnership in respect of the forgiveness year of income, each partner is taken to have had a debt forgiven during the forgiveness year of income and there is taken to be, in respect of the debt of each partner, a net forgiven amount worked out in accordance with the following formula:
| Partner ' s share of net income | × Residual amount | |
| Net income |
245-215(4)
If there is a partnership loss in relation to the partnership in respect of the forgiveness year of income, each partner is taken to have had a debt forgiven during the forgiveness year of income and there is taken to be, in respect of the debt of each partner, a net forgiven amount worked out in accordance with the following formula:
| Partner ' s share of partnership loss | × Residual amount | |
| Partnership loss |
245-215(5)
In the formulas in subsections (3) and (4):
partner's share of net income means the part of the net income of the partnership of the forgiveness year of income that is included in the partner's assessable income.
partner's share of partnership loss means the part of the partnership loss that is allowable as a deduction to the partner.
net income means the net income of the partnership of the forgiveness year of income.
partnership loss means the partnership loss of the forgiveness year of income.
residual amount has the meaning given by subsection (2).
245-215(6)
The total net forgiven amount of a partner for the forgiveness year of income as worked out under subsection 245-105(1) includes the net forgiven amount worked out in relation to the partner under this section.
Subdivision 245-G - Special rules affecting related companies
SECTION 245-220 WHAT THIS SUBDIVISION IS ABOUT
This Subdivision applies in certain circumstances if, at the time when a debt incurred by a company is forgiven, the company and another company or other companies constituted a group of related companies.
The forgiven amount of the debt is treated in those circumstances as having been used to generate amounts that would otherwise be taken into account in reducing the taxable incomes of the debtor company and other company or companies in the group.
SECTION 245-225 APPLICATION OF SUBDIVISION
245-225(1)
This Subdivision applies in respect of a debt (the relevant debt ) incurred by a company (the debtor company ) if, and only if:
(a) the relevant debt has been forgiven; and
(b) there is a net forgiven amount in respect of the relevant debt; and
(c) the debtor company and another company or other companies constitute a group of related companies in respect of the relevant debt.
245-225(2)
The debtor company and another company or other companies constitute a group of related companies in respect of the relevant debt for the purposes of this section if the companies concerned were under common ownership:
(a) at the time when the relevant debt was forgiven; and
(b) at any time on the last day of the year of income that immediately preceded the forgiveness year of income in respect of the relevant debt.
245-225(3)
If:
(a) the debtor company and another company were not under common ownership at the times mentioned in subsection (2); and
(b) the 2 companies had been under common ownership at any time within:
(i) the 2 years of income that immediately preceded the forgiveness year of income in respect of the relevant debt; or
(ii) the part of the forgiveness year of income that occurred before the relevant debt was forgiven; and
the other company is taken to be included in the group of related companies referred to in subsection (2) in respect of the relevant debt if:
(c) a taxpayer who was a controller of the other company immediately before, and immediately after, the 2 companies ceased to be under common ownership was also:
(i) a controller of the other company at the time when the relevant debt was forgiven; and
(ii) a controller of the debtor company at that time; or
(d) immediately before, and immediately after, the 2 companies ceased to be under common ownership and at the time when the relevant debt was forgiven:
(i) the debtor company was a controller of the other company; or
(ii) the other company was a controller of the debtor company.
SECTION 245-230 IF ANY NON-DEBTOR COMPANIES IN A GROUP OF RELATED COMPANIES HAVE DEDUCTIBLE REVENUE LOSSES
245-230(1)
This section applies in relation to the relevant debt if, and only if, any one or more of the non-debtor companies in the group of related companies in respect of the relevant debt have deductible revenue losses for the purposes of the application of this Division in relation to the forgiveness year of income in respect of the relevant debt (the relevant year of income ).
245-230(2)
The net forgiven amount of the relevant debt (the disregarded net forgiven amount ) is disregarded for the purposes of this Division other than this Subdivision.
245-230(3)
However, each company in the group that has deductible revenue losses for the purposes mentioned in subsection (1) (including the debtor company if it has deductible revenue losses for those purposes) is taken to have had a debt forgiven during the relevant year of income and there is taken to be, in respect of each such debt, a net forgiven amount worked out in accordance with the following formula:
| Company
'
s deductible
revenue losses |
× | Disregarded net forgiven
amount |
||
| Total deductible
revenue losses |
where:
company's deductible revenue losses means the total of the company's deductible revenue losses for the purposes of the application of this Division in relation to the relevant year of income.
total deductible revenue losses means the total of the deductible revenue losses of all the companies in the group of related companies for the purposes of the application of this Division in relation to the relevant year of income.
245-230(4)
In this section:
deductible revenue loss of a company does not include an amount of a tax loss transferred to the company by another company if the other company incurred the tax loss in the relevant year of income.
Note:
Subdivision 170-A of the Income Tax Assessment Act 1997 provides for the transfer of tax losses within wholly-owned groups of companies.
SECTION 245-235 IF ANY NON-DEBTOR COMPANIES IN A GROUP OF RELATED COMPANIES HAVE DEDUCTIBLE NET CAPITAL LOSSES
245-235(1)
This section applies in relation to the relevant debt if, and only if, for the purposes of the application of this Division in relation to the forgiveness year of income in respect of the relevant debt (the relevant year of income ):
(a) none of the companies in the group of related companies in respect of the relevant debt have deductible revenue losses; but
(b) any one or more of the non-debtor companies in the group of related companies in respect of the relevant debt have deductible net capital losses.
245-235(2)
The net forgiven amount of the relevant debt (the disregarded net forgiven amount ) is disregarded for the purposes of this Division other than this Subdivision.
245-235(3)
However, each company in the group that has deductible net capital losses for the purposes mentioned in subsection (1) (including the debtor company if it has deductible net capital losses for those purposes) is taken to have had a debt forgiven during the relevant year of income and there is taken to be, in respect of each such debt, a net forgiven amount worked out in accordance with the following formula:
| Company
'
s deductible
net capital losses |
× | Disregarded net forgiven
amount |
||
| Total deductible
net capital losses |
where:
company's deductible net capital losses means the total of the company's deductible net capital losses for the purposes of the application of this Division in relation to the relevant year of income.
total deductible net capital losses means the total of the deductible net capital losses of all the companies in the group of related companies for the purposes of the application of this Division in relation to the relevant year of income.
245-240
If neither section 245-230 nor 245-235 applies in respect of the relevant debt, this Subdivision does not affect the application of the preceding Subdivisions in relation to the net forgiven amount of the debt.
Subdivision 245-H - General
245-245(1)
In this Division, unless the contrary intention appears:
associate
has the meaning given by section
318
.
commencement day
means the day on which this Schedule commences.
debt
includes a part of a debt.
debtor company
, in relation to a group of companies that are related companies in respect of a debt incurred by one of those companies, means the company in the group that incurred the debt.
deductible net capital loss
, subject to subsection (2), has the meaning given by section
245-125
.
deductible revenue loss
, subject to subsection (2), has the meaning given by section
245-110
.
extinguished
, in relation to a debt, does not include payment of the whole of the debt in cash.
forgive
, in relation to a debt, has the meaning given by section
245-35
.
forgiveness year of income
has the meaning given by subsection
245-105(1)
.
moneylending debt
means a debt resulting from a loan of money to the debtor made by the creditor in the ordinary course of a business of lending money carried on by the creditor.
net forgiven amount
, in relation to a debt, has the meaning given by Subdivision
245-D
.
non-debtor company
, in relation to a group of companies that are related companies in respect of a debt incurred by one of those companies, means a company in the group other than the company that incurred the debt.
pay
includes repay.
related group of companies
has the meaning given by section
245-225
.
total net forgiven amount
, in relation to a debtor in respect of a forgiveness year of income, has the meaning given by subsection
245-105(1)
.
245-245(2)
In determining for the purposes of this Division whether a non-debtor company in a group of companies that are related companies in respect of a debt has a deductible revenue loss or a deductible net capital loss , the relevant definitions of those expressions as set out in sections 245-110 and 245-125 , respectively, are to be applied as if the company were the debtor company.
245-250
For the purposes of this Division, the question whether 2 companies were under common ownership at a particular time is to be determined in the same way as that question would be determined under the definition of under common ownership in subsection 995-1(1) of the Income Tax Assessment Act 1997 .
245-255
For the purposes of this Division, the question whether a taxpayer was a controller of a company at a particular time is to be determined in the same way as the question whether an entity is a controller (for CGT purposes) of a company is determined under section 140-20 of the Income Tax Assessment Act 1997 .
245-260(1)
Subject to subsection (2), if a debt resulted from the debtor's drawing from time to time on an established line of credit, the debt is taken, for the purposes of this Division, to have been incurred at the time when the debtor first drew on the line of credit.
245-260(2)
If, at any time after a debtor made a drawing or drawings on a line of credit, the debtor repaid the only previous drawing or all the previous drawings, as the case may be, the reference in subsection (1) to the time when the debtor first drew on the line of credit is taken to be a reference to the time of the first drawing after the repayment.
245-265(1)
A person (the debtor ) who incurs a commercial debt must keep any records that are necessary to enable the following matters to be readily found out:
(a) the date on which the debt was incurred;
(b) the identity of the creditor;
(c) the amount of the debt;
(d) the terms of repayment of the debt;
(e) if the debt is not a moneylending debt and the debtor and the creditor were not dealing with each other at arm's length in respect of the incurring of the debt - the debtor's capacity at the time when the debt was incurred to pay the debt when it falls due;
(f) if the debtor's obligation to pay the debt is forgiven - the date of the forgiveness and the consideration (if any) in respect of the forgiveness.
Note:
There is an administrative penalty if you do not keep or retain records as required by this section: see section 288-25 in Schedule 1 to the Taxation Administration Act 1953 .
245-265(2)
If a company and another company that are under common ownership cease to be under common ownership, each company must keep any records that are necessary to enable the following matters to be readily found out:
(a) the date on which the companies ceased to be under common ownership;
(b) the identity of each person who was a controller of the company immediately before the companies ceased to be under common ownership;
(c)the identity of each person who was a controller of the company immediately after the companies ceased to be under common ownership.
245-265(3)
A person who is required by subsection (1) or (2) to keep records must keep them in writing in the English language or so as to enable them to be readily accessible and convertible into writing in the English language.
245-265(4)
Subject to subsection (5), a person who keeps any records, relating to a debt incurred by the person, as required by subsection (1) must retain the records until:
(a) if paragraph (b) does not apply - the end of 5 years after the debt was forgiven; or
(b) if the period (the assessment period ) within which the Commissioner may, under section 170 , amend an assessment in respect of the person's income of the year of income to which the records relate, or in which a transaction or act to which the records relate was completed, is extended under subsection 170(7) :
(i) the end of the period of 5 years referred to in paragraph (a); or
whichever is the later.
(ii) the end of the assessment period as so extended;
245-265(5)
Subsection (4) does not require records in respect of a debt that has been wholly paid in cash to be retained after the debt was so paid.
245-265(6)
Subject to subsection (7), each company referred to in subsection (2) that keeps any records relating to the company as required by subsection (2) must retain the records until the end of the second year of income after the year of income in which the company and the other company referred to in subsection (2) ceased to be under common ownership.
245-265(7)
If a debt of one of the companies referred to in subsection (2) was forgiven at any time after the companies ceased to be under common ownership and before the end of the second year of income after the year of income in which the cessation occurred, each of the companies that keeps any records relating to the company as required by that subsection must retain the records until:
(a) if paragraph (b) does not apply - the end of 5 years after the debt was forgiven; or
(b) if the period (the assessment period ) within which the Commissioner may, under section 170 , amend an assessment in respect of the company's income of the year of income to which the records relate, or in which a transaction or act to which the records relate was completed, is extended under subsection 170(7) :
(i) the end of the period of 5 years referred to in paragraph (a); or
whichever is the later.
(ii) the end of the assessment period as so extended;
245-265(8)
A person who contravenes a provision of this section is guilty of an offence punishable on conviction by a penalty of not more than 30 penalty units.
245-265(8A)
Subsection (8) does not apply to the extent that the person has a reasonable excuse.
Note:
A defendant bears an evidential burden in relation to the matters in subsection (8A), see subsection 13.3(3) of the Criminal Code .
245-265(9)
This section does not limit the application of any other provision of this Act relating to the keeping or retention of records.
Sch 2C inserted by No 76 of 1996.
This Division is about the income tax treatment of a taxpayer whose income ceases to be wholly exempt. Broadly, income, outgoings, gains and losses are attributed to the periods before and after the loss of full exemption.
If:
(a) at a particular time, all of the income of a taxpayer is wholly exempt from income tax; and
(b) immediately after that time, the taxpayer ' s income becomes to any extent assessable income;
then:
(c) the taxpayer is a transition taxpayer ; and
(d) the time when the taxpayer ' s income becomes to that extent assessable is the transition time ; and
(e) the year of income in which the transition time occurs is the transition year for the taxpayer.
If:
(a) at the transition time, the transition taxpayer performs particular functions or carries on particular activities; and
(b) during any period before the transition taxpayer first began to perform the functions or carry on the activities, an exempt government entity performed those same functions or carried on those same activities; and
(c) at the end of the period, responsibility for performing the functions or carrying on the activities was transferred, either directly or through one or more other exempt government entities, to the transition taxpayer;
this Division applies as if, during that period, anything done by or to the exempt government entity in performing those functions or carrying on those activities had instead been done by or to the transition taxpayer.
Note:
As a result of this provision, the transition taxpayer may for example be able to deduct after the transition time, under Division 40 of the Income Tax Assessment Act 1997 as modified by Subdivision 57-J of this Schedule, a portion of allowable capital expenditure incurred before the transition time by an exempt government entity whose functions were transferred to the transition taxpayer.
57-10(2)
An exempt government entity is:
(a) the Commonwealth, a State or a Territory; or
(b) an STB, within the meaning of Division 1AB of Part III , that is exempt from tax under that Division.
To the extent that income derived by the transition taxpayer before the transition time is in respect of:
(a) services rendered; or
(b) goods provided; or
(c) the doing of any other thing;
at or after the transition time, the income is treated for the purposes of this Act as having been derived at the time the services were rendered, the goods were provided or the thing was done, as the case requires.
57-15(2)
To the extent that income derived by the transition taxpayer at or after the transition time is in respect of:
(a) services rendered; or
(b) goods provided; or
(c) the doing of any other thing;
before the transition time, the income is treated for the purposes of this Act as having been derived before that time.
To the extent that a loss or outgoing (within the meaning of section 51 of this Act or section 8-1 of the Income Tax Assessment Act 1997 , as appropriate) incurred by the transition taxpayer before the transition time is in respect of:
(a) services rendered; or
(b) goods provided; or
(c) the doing of any other thing;
at or after the transition time, the loss or outgoing is treated for the purposes of this Act as having been incurred at the time the services were rendered, the goods were provided or the thing was done, as the case requires.
57-20(2)
To the extent that a loss or outgoing (within the meaning of section 51 of this Act or section 8-1 of the Income Tax Assessment Act 1997 , as appropriate) incurred by the transition taxpayer at or after the transition time is in respect of:
(a) services rendered; or
(b) goods provided; or
(c) the doing of any other thing;
before the transition time, the loss or outgoing is treated for the purposes of this Act as having been incurred before that time.
Subdivision 57-E - Assets and liabilities
This section applies to:
(a) the disposal of an asset by the transition taxpayer after the transition time; and
(b) a CGT event that happens after the transition time in relation to an asset owned by the transition taxpayer;
where the transition taxpayer owned the asset at all times from the transition time until the disposal or the CGT event.
57-25(2) Deemed disposal and re-purchase.
Subject to subsection (5), in determining for the purposes of this Act (other than the excluded provisions mentioned in subsection (4)) whether an amount is included in, or allowable as a deduction from, the assessable income of the transition taxpayer in respect of the disposal, the transition taxpayer is taken:
(a) to have sold, immediately before the transition time, each of its assets; and
(b) to have purchasedeach of its assets again at the transition time for consideration equal to the asset ' s adjusted market value at the transition time.
For the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (about CGT), in determining whether the transition taxpayer makes a capital gain or capital loss from a CGT event that happens after the transition time in relation to an asset referred to in subsection (1), the cost base and reduced cost base of the asset (at the transition time) is its adjusted market value at that time.
57-25(3)
An asset ' s adjusted market value at the transition time is the asset ' s market value at that time:
(a) reduced by any amount of income received or receivable by the transition taxpayer in respect of the asset at or after the transition time that:
(i) because of subsection 57-15(2) ; or
is not included in the transition taxpayer ' s assessable income; and
(ii) because all of the income of the transition taxpayer was wholly exempt from income tax before the transition time;
(b) increased by any amount of income received or receivable by the transition taxpayer in respect of the asset before the transition time that:
(i) because of subsection 57-15(1) ; or
is included in the transition taxpayer ' s assessable income.
(ii) because the transition taxpayer ' s income ceased to be exempt from income tax at the transition time;
Note:
If the asset is, or is part of, a Division 230 financial arrangement, section 57-32 may affect how the market value of the asset is worked out.
57-25(4) Excluded provisions.
For the purposes of subsection (2), the excluded provisions are:
(a) - (d) (Repealed by No 101 of 2006 )
(e) former Division 10B of Part III of this Act (about industrial property); and
(f) former Division 10BA of Part III of this Act (about Australian films); and
(g) (Repealed by No 101 of 2006 )
(ga) Division 40 of the Income Tax Assessment Act 1997 (about capital allowances); and
(h) (Repealed by No 101 of 2006 )
(i) Division 43 of the Income Tax Assessment Act 1997 (about deductions for capital works); and
(j) section 70-120 of the Income Tax Assessment Act 1997 (about deducting capital costs of acquiring trees);
(k) (Repealed by No 101 of 2006 )
(la) Division 373 of the Income Tax Assessment Act 1997 (about intellectual property).
(l) (Repealed by No 101 of 2006 )
(a) acquired an asset (whether before the transition time or otherwise) before the commencement of a provision listed in subsection (6); and
(b) after acquiring the asset, owned the asset at all times before the transition time;
the deemed acquisition of the asset under subsection (2) does not affect the operation of the listed provision.
57-25(6) Listed provisions.The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .
| Listed provisions | |
| Item | Provision |
| 1 | section 26BB |
| 2 | (Repealed by No 47 of 2016) |
| 3 | section 70B |
| 4 | the former Division 3B of Part III |
| 5 | Division 16E of Part III |
| 6 | Subdivision 20-A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under the former subsection 82Z(1) . |
| 6A | Division 230 |
| 7 | Division 775 |
| 8 | Subdivision 20-A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under section 775-30. |
For the purposes of the application of subsection (5) to the transition taxpayer, a provision covered by item 7 or 8 of the table in subsection (6) is taken to have commenced at the start of the taxpayer ' s applicable commencement date (within the meaning of Division 775 of the Income Tax Assessment Act 1997 ).
Note:
For applicable commencement date , see section 775-155 of the Income Tax Assessment Act 1997 .
57-25(6B)
The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer in relation to a provision covered by item 7 or 8 of the table in subsection (6) if the taxpayer makes an election under section 775-150 of the Income Tax Assessment Act 1997 .
57-25(7) Avoidance of doubt - debt write-off.
To avoid doubt, an effect of subsection (2) is that the sum of all allowable deductions (if any) in respect of the writing off as bad of the whole or part of a debt to which that subsection applies will not exceed the market value of the debt at the transition time.
57-25(8) Avoidance of doubt - disposal need not involve an alienation.To avoid doubt, an asset may be disposed of for the purposes of this section whether or not the disposal involves alienating the asset.
Subject to subsection (3), for the purposes of determining a deduction allowable to, or an amount included in the assessable income of, the transition taxpayer after the transition time in respect of the satisfaction of a liability owed by the transition taxpayer immediately before the transition time, the transition taxpayer is taken:
(a) to have ceased immediately before the transition time to have any liabilities; and
(b) to have assumed each of its liabilities again at the transition time in return for consideration equal to the adjusted market value (see subsection (2)) at that time of the right or other asset, corresponding to the liability, that was held by the person to whom the liability was owed.
57-30(2)
The adjusted market value of the corresponding right or other asset is the market value of that right or asset at the transition time:
(a) reduced by any amount paid or that becomes payable by the transition taxpayer in respect of the liability at or after the transition time, where:
(i) because of subsection 57-20(2) ; or
the amount is not an allowable deduction; and
(ii) because all of the transition taxpayer ' s income was wholly exempt from income tax before the transition time;
(b) increased by any amount paid or that became payable by the transition taxpayer in respect of the liability before the transition time, where:
(i) because of subsection 57-20(1) ; or
the amount is an allowable deduction.
(ii) because the transition taxpayer ' s income ceased to be exempt from income tax at the transition time;
Note:
If the liability is, or is part of, a Division 230 financial arrangement, section 57-32 may affect how the market value of the corresponding right or other asset is worked out.
57-30(3)
A provision listed in subsection (4) only applies to a liability of the transition taxpayer at the transition time if the liability first came into existence after the day on which Division 3B of Part III commenced.
57-30(4)
The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .
| Listed provisions | |
| Item | Provision |
| 1 | the former Division 3B of Part III |
| 2 | Subdivision 20-A, sofar as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under the former subsection 82Z(1) . |
57-30(5)
A provision listed in subsection (6) only applies to a liability of the transition taxpayer at the transition time if the taxpayer first assumed the liability on or after the taxpayer ' s applicable commencement date (within the meaning of Division 775 of the Income Tax Assessment Act 1997 ).
Note:
For applicable commencement date , see section 775-155 of the Income Tax Assessment Act 1997 .
57-30(6)
The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text.
| Listed provisions | |
| Item | Provision |
| 1 | Division 775 |
| 2 | Subdivision 20-A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under section 775-30. |
57-30(7)
The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer if the taxpayer makes an election under section 775-150 of the Income Tax Assessment Act 1997 .
SECTION 57-32 DIVISION 230 FINANCIAL ARRANGEMENTS - MARKET VALUE OF ASSETS AND RIGHTS 57-32(1)
This section applies in relation to an asset (the subject asset ) held by an entity (the holder ) if:
(a) the subject asset is:
(i) covered by subsection 57-25(1) ; or
(ii) a right, or other asset, corresponding to a liability covered by subsection 57-30(1) ; and
(b) the subject asset, or the corresponding liability for the subject asset, is or is part of a Division 230 financial arrangement at the transition time; and
(c) when the arrangement was entered into:
(i) the parties to the arrangement were not dealing at arm ' s length (within the meaning of the Income Tax Assessment Act 1997 ) in relation to the subject asset; or
(ii) if the subject asset gives rise to an interest that is not an equity interest in an entity - the return on the interest would reasonably be expected to be less than the benchmark rate of return (within the meaning of that Act) for the interest.
57-32(2)
For the purposes mentioned in subsection (3), assume at the transition time that the market value of the subject asset is the total amount (the initial amount ) of the financial benefits (within the meaning of the Income Tax Assessment Act 1997 ) that the holder provided in relation to the subject asset before the transition time:
(a) reduced by:
(i) repayments of principal made in relation to the subject asset before the transition time; and
(ii) the amount of any impairment (within the meaning of the accounting principles (within the meaning of that Act)) of the subject asset at the transition time; and
(b) increased by the amount of the cumulative amortisation (worked out using the effective interest method recognised by the accounting principles (within the meaning of that Act)) of any difference at the transition time between:
(i) the initial amount; and
(ii) the amount payable on the maturity of the subject asset.
57-32(3)
Subsection (2) has effect for the purposes of working out the subject asset ' s adjusted market value under section 57-25 or 57-30 for use when applying Division 230 of the Income Tax Assessment Act 1997 to the subject asset or the corresponding liability for the subject asset.
This section applies in relation to the following:
(a) an asset covered by subsection 57-25(1) to which section 57-32 applies;
(b) the corresponding liability for a right, or other asset, covered by subsection 57-30(1) to which section 57-32 applies.
Note:
Section 57-32 applies if the asset or liability is or is part of a Division 230 financial arrangement.
57-33(2)
For the purposes of section 230-60 of the Income Tax Assessment Act 1997 , assume the following:
(a) in the case of an asset - that the transition taxpayer acquired the asset at the transition time in return for the transition taxpayer starting to have an obligation to provide one or more financial benefits in relation to the Division 230 financial arrangement;
(b) in the case of a liability - that the transition taxpayer started to have the liability at the transition time in return for the transition taxpayer starting to have a right to receive one or more financial benefits under the Division 230 financial arrangement.
In this Subdivision:
asset
means property, or a right, of any kind, and includes:
(a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and
(b) any chose in action; and
(c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and
(d) (Repealed by No 101 of 2006 )
(e) a CGT asset;
but does not include trading stock.
liability
includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).
This section applies to a deduction allowable apart from this Subdivision to the transition taxpayer under section 290-60 of the Income Tax Assessment Act 1997 for a contribution made to a fund in relation to a person if:
(a) the person was an employee of the transition taxpayer at any time before or after the transition time; and
(b) the contribution was made under a defined benefit superannuation scheme (within the meaning of section 6A of the Superannuation Guarantee (Administration) Act 1992 ).
57-40(2) Deduction allowable only if sum of all deductions exceeds defined benefit threshold amount.
The deduction is not allowable for a year of income if the sum of all deductions of the transition taxpayer to which this section applies for the year of income isless than or equal to the defined benefit threshold amount (see subsection (4)) for the year of income.
57-40(3) Amount of deduction not allowable.If the sum is greater than that amount, so much of the deduction as is worked out using the following formula is not allowable:
|
Amount of deduction
Sum of all deductions of the transition taxpayer to which this section applies for the year of income |
×
|
Defined benefit threshold
amount for the year of income |
The defined benefit threshold amount for a year of income is:
(a) if the year of income is the transition year - the unfunded liability amount (see subsection (5)); or
(b) in any other case - that amount as reduced by the total amount of deductions to which this section applies, that, because of subsection (2) or (3), have not (disregarding section 57-55 ) been allowable to the transition taxpayer for all previous years of income. 57-40(5) Meaning of unfunded liability amount .
The unfunded liability amount is the value, worked out as at the transition time in accordance with actuarial principles, of the liabilities of the transition taxpayer to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer, where the liabilities:
(a) had accrued as at the transition time; and
(b) were, according to actuarial principles, unfunded at that time; and
(c) were liabilities only under defined benefit superannuation schemes.
If:
(a) at the transition time, according to a particular defined benefit superannuation scheme ' s accounts, an amount is available to meet liabilities of the transition taxpayer under the scheme to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer; and
(b) the amount exceeds the total value (as worked out according to actuarial principles) of the liabilities of that kind that have accrued as at the transition time; and
(c) before the transition time, the transition taxpayer makes a writtenelection that the excess is to be used solely to meet liabilities of that kind accruing after the transition time, and the excess is later used solely to meet such liabilities;
the excess is an allowable deduction of the transition taxpayer for the transition year.
This section applies to a deduction allowable apart from this Subdivision to the transition taxpayer under section 290-60 of the Income Tax Assessment Act 1997 for a contribution made to a fund in relation to a person if the person was an employee of the transition taxpayer at any time before or after the transition time.
57-50(2) Deduction allowable only if sum of all deductions exceeds general superannuation threshold amount.
The deduction is not allowable for a year of income if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the general superannuation threshold amount (see subsection (4)) for the year of income.
57-50(3) Amount of deduction not allowable.If the sum is greater than the general superannuation threshold amount, so much of the deduction as is worked out using the following formula is not allowable:
| Amount of deduction | × | General superannuation threshold amount | ||
| Sum of all deductions of the transition taxpayer to which this section applies for the year of income | ||||
The general superannuation threshold amount for a year of income is:
(a) if the year of income is the transition year - the undischarged superannuation liability amount (see subsection (5)); or
(b) in any other case - the amount applicable under paragraph (a), reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not (disregarding section 57-55 ) been allowable to the transition taxpayer for all previous years of income. 57-50(5) Meaning of undischarged superannuation liability amount .
This is how to work out the transition taxpayer ' s undischarged superannuation liability amount :
Step 1.
For each person who was an employee of the transition taxpayer at any time before the transition time, take the sum of:
Step 2.
Reduce the sum from Step 1 by the sum of amounts that the transition taxpayer actually contributed before the start of the transition year:
in respect of any period of employment of the employee with the transition taxpayer before the transition time.
Step 3.
If the result after applying Step 2 for a particular employee is less than nil, it is nil instead.
Step 4.
Add up the results for all of the employees. This final sum is the transition taxpayer ' s undischarged superannuation liability amount .
The superannuation guarantee period is the period beginning on 1 July 1992 and ending at the transition time.
A required award etc. contribution amount is an amount required to be contributed to a superannuation fund by an employer for the benefit of an employee:
(a) by an industrial award; or
(b) by an occupationalsuperannuation arrangement; or
(c) by a law of the Commonwealth, a State or a Territory; or
(d) otherwise. 57-50(8) Meaning of required superannuation guarantee contribution amount.
A
required superannuation guarantee contribution amount
is an amount that an employer would need to contribute in respect of a period so as not to have a superannuation guarantee shortfall under the
Superannuation Guarantee (Administration) Act 1992
in respect of that period.
Note:
The relevant periods for which shortfalls are or were calculated under that Act are quarters (from 1 July 1993 onwards) or half-years (from 1 July 1992 to 30 June 1993).
[
CCH Note:
S 57-50(8) will be amended by No 57 of 2025, s 3 and Sch 1 item 78, by repealing the note, effective 1 July 2026. No 57 of 2025, s 3 and Sch 1 items 181 and 183
-
189 contain the following application and transitional provisions:
new Act
new law
181 Definitions
181
In this Part:
means the
Superannuation Guarantee (Administration) Act 1992
as amended by this Schedule.
means an Act as amended by this Schedule other than any of the following:
(a)
the
Corporations Act 2001
;
(b)
the
Fair Work Act 2009
;
(c)
the
Superannuation Guarantee (Administration) Act 1992
.
old Act
, as in force on a particular day before 1 July 2026, means the
Superannuation Guarantee (Administration) Act 1992
as in force on that day.
old law
means an Act amended by this Schedule (other than the
Superannuation Guarantee (Administration) Act 1992
) as that Act was in force immediately before 1 July 2026.
…
183 Application of amendments of other Acts
Application of the amendments
(1)
The new law applies in relation to the following:
(a) a QE day that is 1 July 2026 or a later day;
(b) a liability to pay superannuation guarantee charge relating to a QE day that is 1 July 2026 or a later day;
(c) individual base superannuation guarantee shortfalls relating to a QE day that is 1 July 2026 or a later day;
(d) individual final superannuation guarantee shortfalls relating to a QE day that is 1 July 2026 or a later day.
Saving of the old law
(2)
Despite the amendments made by this Schedule of the old law, the old law continues to apply on and after 1 July 2026 in relation to the following as if the amendments had not been made:
(a) a liability to pay superannuation guarantee charge relating to a quarter ending before 1 July 2026 (whether the liability arose before, on or after 1 July 2026);
(b) a related liability (whether the related liability arose before, on or after 1 July 2026);
(c) individual superannuation guarantee shortfalls relating to a quarter ending before 1 July 2026;
(d) contributions to reduce a charge percentage relating to a quarter ending before 1 July 2026;
(e) salary or wages relating to a quarter ending before 1 July 2026;
(f) an obligation to give a statement or information to the Commissioner under the Superannuation Guarantee (Administration) Act 1992 relating to a quarter ending before 1 July 2026;
(g) determining matters relevant to working out the SG minimum contribution (within the meaning of Part VIAA of the Superannuation Act 1976 ) for part of a period of employment that is before 1 July 2026.
Example:
Under the old law, the notional productivity amount under subsection 128(8) of the Superannuation Act 1976 is worked out by reference to so much of a person ' s earnings as are relevant for establishing whether an employer incurred an individual superannuation guarantee shortfall in relation to the person. Paragraph (c) of this subitem means that, on or after 1 July 2026, the notional productivity amount will continue to be worked out in this way in relation to periods ending before that day.
Note:
Assume regulations or other instruments can be made for a provision of the old law. If that provision of the old law continues to apply because of this item, then any regulations or instruments made for that provision will also continue to apply (and can continue to be made) for any of the matters in paragraphs (a) to (g).
184 Transitional - reversal after commencement of pre-commencement sacrificed contributions
184
For the new Act, a reversal of a sacrificed contribution includes a payment made on or after 1 July 2026 that represents the reversal of all or part of a contribution that was:
(a) a sacrificed contribution (within the meaning of the old Act on 30 June 2026); and
(b) made before 1 July 2026. 185 Transitional - excess contributions made before 1 July 2026 can be applied under the new Act
(1)
This item applies to a contribution made on a day (the contribution day ) before 1 July 2026 that would be an eligible contribution made by an employer for the benefit of an employee if the new Act applied in relation to QE days before 1 July 2026.
(2)
For the purposes of the definition of eligible contributions relevant for the QE day in subsection 18C(1) of the new Act, treat so much of the contribution as is neither:
(a) applied under the old Act (as in force on the contribution day) to reduce the charge percentage for the employer for a quarter ending before 1 July 2026; nor
(b) offset under section 23A of the old Act (as in force on the contribution day) against a liability of the employer relating to a quarter ending before 1 July 2026;
as an eligible contribution made by the employer for the benefit of the employee.
(3)
To avoid doubt, the 12-month period mentioned in subparagraph (c)(ii) of that definition can start before 1 July 2026.
186 Transitional - how to apply contributions made between 1 July 2026 and 28 July 2026
(1)
This item applies to an eligible contribution made by an employer for the benefit of an employee if:
(a) the contribution is made on a day (the contribution day ) between 1 July 2026 and 28 July 2026; and
(b) under the old Act (as in force on 30 June 2026), the employer has on the contribution day an individual superannuation guarantee shortfall that is greater than nil for the employee for the quarter ending on 30 June 2026.
First apply the contribution under the old Act
(2)
Without limiting subitem 182(3) of this Schedule, the old Act (as in force on 30 June 2026) continues to apply on and after 1 July 2026 in relation to the contribution in order to reduce the charge percentage for the employer for the employee for that quarter.
Then apply any remainder under the new Act
(3)
Despite subsection 18C(1) of the new Act, only so much of the contribution as is not applied under the old Act in the way described in subitem (2) is able to be applied under that subsection for a QE day that is on or after 1 July 2026.
187 Transitional - ending notice periods under the old Act
187
An employer ' s notice period that:
(a) was within the meaning of subsection 19A(4) of the old Act (as in force on 30 June 2026); and
(b) was in force on 30 June 2026;
is taken to end at the end of 30 June 2026.
188 Application of amendments - repayments of overpayments relating to a shortfall component188
Section 69 of the new Act applies in relation to a payment by the Commissioner before, on or after 1 July 2026.
Note:
The excess amount paid by the Commissioner can only be recovered once (see subsection 69(7) of the new Act.
189 Transitional - Norfolk Island salary or wages(1)
This item applies if:
(a) some or all of an employer ' s payment of qualifying earnings to or for an employee on a QE day consists of Norfolk Island salary or wages; and
(b) the QE day is in the financial year ending on 30 June 2027;
whether the payment of qualifying earnings relates to work done before, during or after that financial year.
(2)
For the purposes of subsection 17A(2) of the new Act, treat the amount of the qualifying earnings for the employer, employee and the QE day as if it were reduced by the result of the following:
| Total Norfolk Island salary or wages paid to or for the employee by the employer on the QE day | × | 1 | ||
| 12 |
(3)
In this item:
Norfolk Island salary or wages
means qualifying earnings paid to or for the employee:
(a) while the employee is a resident of Norfolk Island, and for work done in Norfolk Island or outside Australia; or
(b) while the employer is a resident of Norfolk Island, and while the employee is a resident of Australia for work done in Norfolk Island.
Note:
For a similar result for quarters in a financial year starting on or after 1 July 2016 and ending before 1 July 2026, see subitem 2(2) of Schedule 2 to the Tax and Superannuation Laws Amendment (Norfolk Island Reforms) Act 2015 (as amended by this Schedule).
]
Section 57-50 does not apply to a deduction of the kind mentioned in subsection 57-50(1) if:
(a) at the transition time, according to the accounts of the fund concerned, an amount is available to meet liabilities of the transition taxpayer in relation to the fund to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer; and
(b) the amount exceeds the value (as worked out according to actuarial principles) of the liabilities of that kind that have accrued as at the transition time.
If the amount of a deduction otherwise allowable to the transition taxpayer in respect of a contribution to a fund is required to be reduced under both sections 57-40 and 57-50 :
(a) if the reduction is of a different amount - the amount is reduced only under that section that requires the greater reduction; or
(b) if the reduction is of the same amount - the amount is reduced only under section 57-40 .
This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under subsection 51(1) of this Act or section 8-1 (about general deductions) of the Income Tax Assessment Act 1997 in respect of long service leave payments or annual leave payments to a person who was an employee of the transition taxpayer at any time before or after the transition time.
Note:
Subsection 51(3) of this Act or section 26-10 of the Income Tax Assessment Act 1997 (as appropriate) contains additional requirements for certain leave payments to be deductible.
57-60(2) Deduction allowable only if sum of all deductions exceeds leave threshold amount.
The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the leave threshold amount (see subsection (4)) for the year of income.
57-60(3) Amount of deduction not allowable.If the sum is greater than the leave threshold amount, so much of the deduction as is worked out using the following formula is not allowable:
| Amount of deduction | × | Leave threshold amount for the year of income | ||
| Sum of all deductions of the transition taxpayer to which this section applies for the year of income | ||||
The leave threshold amount for a year of income is:
(a) if the year of income is the transition year - the (pre-transition time service) leave amount (see subsection (5)) of the transition taxpayer; or
(b) in any other case - that amount as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income. 57-60(5) Meaning of (pre-transition time service) leave amount.
The (pre-transition time service) leave amount of the transition taxpayer is the sum of the following amounts:
(a) the amount that would be payable by the transition taxpayer in respect of annual leave and long service leave if, at the transition time, all employees of the transition taxpayer began to take all leave of that kind that they were eligible to take; and
(b) if the transition taxpayer elects, in accordance with subsection (6), that this paragraph applies - the amount that, according to actuarial principles, would need to be set aside at the transition time to meet all obligations of the transition taxpayer that might reasonably be expected to arise after that time to make annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) for periods of service of employees occurring before the transition time; and
(c) if paragraph (b) does not apply - the present value, at the transition time, of all annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) that the transition taxpayer would become liable to make after that time in respect of periods of service of employees occurring before that time if all such leave became eligible to be taken. 57-60(6) Election.
The election mentioned in paragraph (5)(b) must be made in writing before:
(a) the day by which the transition taxpayer ' s return of income for the transition year is due to be lodged; or
(b) such later day as the Commissioner allows.
This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under this Act for the writing off as bad of the whole or part of a debt owing to the transition taxpayer.
57-65(2) Deduction allowable only if sum of all deductions exceeds doubtful debt provision limit.
The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the doubtful debt provision limit (see subsection (4)) for the year of income.
57-65(3) Amount of deduction not allowable.If the sum is greater than that limit, so much of the deduction as is worked out using the following formula is not allowable:
| Amount of deduction | × | Doubtful debt provision limit for the year of income | ||
| Sum of all deductions of the transition taxpayer to which this section applies for the year of income | ||||
The doubtful debt provision limit for a year of income is:
(a) if the year of income is the transition year - the pre-transition doubtful debt limit (see subsection (5)); or
(b) in any other case - that limit as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income. 57-65(5) Meaning of pre-transition doubtful debt limit.
The pre-transition doubtful debt limit is the total of the amounts that, under generally accepted accounting principles, would be the appropriate doubtful debt provisions in relation to all debts owed to the transition taxpayer as at the transition time.
57-65(6) Reduction of limit for excess recovery.(a) at the transition time, a debt is owed to the transition taxpayer; and
(b) the sum of:
(i) the amount (if any) that, under generally accepted accounting principles, would be the appropriate doubtful debt provision in relation to the debt as at the transition time; and
exceeds the amount of the debt;
(ii) any amounts later recovered in respect of the debt;
the pre-transition doubtful debt limit is reduced by the amount of the excess.
57-65(7) Reduction of limit if debt later disposed of.(a) at the transition time, a debt is owed to the transition taxpayer; and
(b) there is an amount (the debt provision amount ) greater than nil that, under generally accepted accounting principles, would be the appropriate doubtful debt provision in relation to the debt as at the transition time; and
(c) after the transition time, the transition taxpayer disposes of the debt to another person;
the pre-transition doubtful debt limit is reduced by:
(d) if, after the transition time, the transition taxpayer wrote off part of the debt as bad - the excess (if any) of the debt provision amount over the amount or amounts so written off; or
(e) in any other case - the debt provision amount.
This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under section 8-1 (about general deductions) or 25-50 (about pensions, gratuities or retiring allowances) of the Income Tax Assessment Act 1997 for a superannuation lump sum or an employment termination payment for a person who was an employee of the transition taxpayer at any time before the transition time (regardless of whether the person was an employee at or after the transition time).
57-70(2)
So much (if any) of the deduction as relates to a period of service of the employee before the transition time is not allowable.
57-70(3)
This section does not apply to an early retirement scheme payment (within the meaning of the Income Tax Assessment Act 1997 ), or a genuine redundancy payment (within the meaning of that Act).
57-70(4)
(Repealed by No 15 of 2007)
Subdivision 57-H - Domestic losses
In applying section 36-15 or 36-17 of the Income Tax Assessment Act 1997 (about how to deduct tax losses) to the transition taxpayer:
(a) only exempt income derived at or after the transition time is taken into account as exempt income of the transition taxpayer; and
(b) the transition taxpayer ' s deductions are taken into account only so far as they are in respect of:
(i) services rendered; or
(ii) goods provided; or
at or after the transition time.
(iii) the doing of any other thing;
A modified deduction rule is a provision listed in column 3 of an item in the table in subsection (3). Provisions of the Income Tax Assessment Act 1997 are identified in normal text, while provisions of the Income Tax Assessment Act 1936 are in bold .
57-85(2)
The corresponding deduction provision (if any) for a modified deduction rule listed in column 3 of an item in the table in subsection (3) is the provision of the Income Tax Assessment Act 1936 listed in column 4 of the item.
57-85(3)
The table is as follows:
| Modified deduction rules and corresponding deduction provisions | |||
| Column 1 | Column 2 | Column 3 | Column 4 |
| Item | Description | Modified deduction rule | Corresponding deduction provision |
| 1 | Borrowing expenses | Section 25-25 | Former section 67 |
| 2 - 4 | (Repealed by No 101 of 2006 ) | ||
| 5 | Films, Australian | Former Division 10BA of Part III | |
| 6 | (Repealed by No 101 of 2006 ) | ||
| 7 | Industrial property (copyright in Australian film) | Former Division 10B of Part III | |
| 7A - 8 | (Repealed by No 101 of 2006 ) | ||
| 9 | Gifts | Section 25-50 and Division 30 | Former section 78 |
| 10 - 12 | (Repealed by No 101 of 2006 ) | ||
| 13 | R & D | Division 355 | |
| 14 | Scientific research | Section 73A | |
| 14A - 17 | (Repealed by No 101 of 2006 ) | ||
| 18 | Cost of acquiring trees | Section 70-120 | Former section 124J |
| 19 | Capital allowances | Division 40 |
SECTION 57-90 57-90 POST-TRANSITION DEDUCTIONS - ASSUME THAT THE TRANSITION TAXPAYER HAD NEVER BEEN EXEMPT
In working out the transition taxpayer ' s allowable deductions under a modified deduction rule for the transition year or a later year of income, assume that the modified deduction rule had applied at all times before the transition time as if the transition taxpayer ' s income had never been exempt from income tax.
If, apart from this section, an amount would be an allowable deduction under a modified deduction rule for the transition year in respect of expenditure incurred before the transition time (whether or not during the transition year), only so much of the amount as is worked out using the following formula is so allowable:
| Number of whole days in transition year after transition time | |||
| × | Amount of deduction | ||
| Post-expenditure part |
where:
post-expenditure part means:
(a) if the expenditure was incurred before the transition year - the number of days in the transition year; or
(b) otherwise - the number of days in the period from the beginning of the day on which the expenditure is incurred until the end of the transition year.
57-95(2)
This section does not apply to an amount to which paragraph 57-110(1)(b) (which deals with balancing adjustments) applies.
In working out the transition taxpayer ' s allowable deductions under a modified deduction rule:
(a) assume that the transition taxpayer did not, at any time, make any election or declaration, or give any notice, under the rule in relation to a year of income before the transition year; and
(b) any election or declaration (other than one under former subsection 124ZADA(1) ) the transition taxpayer makes, or any notice the transition taxpayer gives, under the rule in relation to the transition year has no effect in so far as it relates to expenditure incurred before the transition time.
In working out the transition taxpayer ' s allowable deductions under the former Subdivision 330-A or 330-C or Division 40 of the Income Tax Assessment Act 1997 , assume that the transition taxpayer incurred no expenditure on exploration and prospecting before the transition time.
In working out the transition taxpayer
'
s allowable deductions under the former Subdivision
330-A
or
330-C
of the
Income Tax Assessment Act 1997
, assume that, for each year of income before the transition year, the transition taxpayer
'
s assessable income would have exceeded the total of the transition taxpayer
'
s deductions for the year.
Note:
This means that the transition taxpayer can have no excess deductions remaining from years of income before the transition year.
If, apart from this subsection, a balancing adjustment provision (see subsection (2)) would:
(a) require an amount to be included in the transition taxpayer ' s assessable income for the transition year or a later year of income in respect of particular expenditure; or
(b) allow an amount as a deduction from the transition taxpayer ' s assessable income for the transition year or a later year of income in respect of particular expenditure;
then only so much of the amount as is worked out using the following formula is so included or allowable:
| Actual deductions | × Amount concerned | |
| Actual deductions + Notional deductions |
where:
actual deductions is the sum of all deductions actually allowed or allowable to the transition taxpayer for the expenditure under the deduction rule to which the balancing adjustment provision relates (see subsection (2)).
notional deductions is the sum of all deductions for the expenditure that would have been allowable to the transition taxpayer under the deduction rule to which the balancing adjustment provision relates, if the transition taxpayer had never been wholly exempt from income tax.
57-110(2)
Each balancing adjustment provision and its related deduction rule are shown in an item of the table. Provisions of the Income Tax Assessment Act 1997 are shown in ordinary text, and provisions of the Income Tax Assessment Act 1936 are shown in bold .
| Balancing adjustment provisions and related deduction rules | |||
| Item | Topic | Balancing adjustment provision | Deduction rule to which the balancing adjustment provision relates |
| 1 | Capital works: buildings, structural improvements, environment protection earthworks and extensions, alterations or improvements | Section 43-40 | Division 43 and whichever of former Divisions 10C and 10D of Part III is appropriate |
| 2 | (Repealed by No 101 of 2006 ) | ||
| 2A | Capital allowances | Section 40-285 | Division 40 |
| 3 - 4 | (Repealed by No 101 of 2006 ) | ||
| 5 | Industrial property (copyright in Australian film) | Former sections 124N and 124P | Former Division 10B of Part III |
| 5A - 6 | (Repealed by No 101 of 2006 ) | ||
| 7 | R & D | Sections 40-292, 40-293, 355-315 and 355-525 | Section 40-25, 355-305 or 355-520 |
| 8 | Scientific research | Subsection 73A(4) | Section 73A |
| 8A - 9 | (Repealed by No 101 of 2006 ) |
Note:
Item 7 of the table is expanded by section 355-340 of the Income Tax (Transitional Provisions) Act 1997 .
57-110(3)
(Repealed by No 16 of 1998)
For the purposes of applying Division 70 of the Income Tax Assessment Act 1997 in relation to the transition year, the only trading stock of the transition taxpayer that is to be taken into account under section 70-35 of that Act as being on hand at the beginning of the transition year is such trading stock as was on hand at the transition time.
57-115(2)
For the purpose of working out the value at which the trading stock is to be taken into account, the year of income preceding the transition year is taken to have ended immediately before the transition time.
Note:
The value of trading stock on hand at the beginning of the transition year will, under section 70-40 of the Income Tax Assessment Act 1997, be the same as at the end of the preceding year of income.
57-115(3)
If:
(a) the basis of valuation of the trading stock at the end of the transition year is cost; and
(b) the basis of valuation at the beginning of the transition year is different;
then, for the purposes of the valuation at the end of the transition year, the cost of the trading stock for the purposes of Division 70 of the Income Tax Assessment Act 1997 is taken to be equal to the value at which it was taken into account at the beginning of the transition year.
Subdivision 57-M - Imputation
Subject to subsections (3) and (4), if, immediately before the transition time, the transition taxpayer or a subsidiary (see section 57-125 ) of the transition taxpayer has a franking surplus, then the surplus is reduced to nil at the transition time.
Subject to subsections (3) and (4), if:
(a) at any time after the transition time, there arises a franking credit or a franking debit of the transition taxpayer or of a subsidiary of the transition taxpayer; and
(b) the franking credit or franking debit is to any extent attributable to a period, or to an event taking place, before the transition time;
the franking credit or franking debit is to that extent taken not to have arisen.
57-120(3) Cases where subsections (1) and (2) do not apply to the transition taxpayer.(a) one or more franking debits of the transition taxpayer arise after the transition time; and
(b) any of the debits is to an extent (the amount of which is the pre-transition time component of the debit) attributable to the period, or to an event taking place, before the transition time; and
(c) immediately before the transition time:
(i) there was a franking surplus of the transition taxpayer that was less than the total of the pre-transition time components of all of the debits; or
(ii) there was no franking surplus of the transition taxpayer;
then:
(d) in a case covered by subparagraph (c)(i) - subsection (1) does not apply to the surplus; and
(e) in any case - subsection (2) does not apply to the debits.
(a) one or more franking debits of a subsidiary of the transition taxpayer arise afterthe transition time; and
(b) any of the debits is to an extent (the amount of which is the pre-transition time component of the debit) attributable to the period, or to an event taking place, before the transition time; and
(c) immediately before the transition time:
(i) there was a franking surplus of the subsidiary that was less than the total of the pre-transition time components of all of the debits; or
(ii) there was no franking surplus of the subsidiary;
then:
(d) in a case covered by subparagraph (c)(i) - subsection (1) does not apply to the surplus; and
(e) in any case - subsection (2) does not apply to the debits.
(Repealed by No 23 of 2005)
SECTION 57-125 SUBSIDIARY 57-125(1)
A company (the subsidiary company ) is a subsidiary of another company (the holding company ) if all the shares in the subsidiary company are beneficially owned by:
(a) the holding company; or
(b) one or more subsidiaries of the holding company; or
(c) the holding company and one or more subsidiaries of the holding company.
57-125(2)
A company (other than the subsidiary company) is a subsidiary of the holding company if, and only if:
(a) it is a subsidiary of the holding company; or
(b) it is a subsidiary of a subsidiary of the holding company;
because of any other application or applications of this section.
Subdivision 57-N - Division not applicable in respect of certain plant
Subdivision 57-J , and Subdivision 57-K in so far as it applies to balancing adjustments for plant or depreciating assets, do not apply in respect of an asset to which Subdivision 58-B of the Income Tax Assessment Act 1997 applies.
57-130(2)
Despite subsection (1), Subdivision 57-J applies for the purposes of section 40-35 of the Income Tax (Transitional Provisions) Act 1997 to capital expenditure incurred by a transition taxpayer before 1 July 2001 that relates to property that is not a depreciating asset.
Subdivision 57-P - Balancing adjustment on ceasing to have a Division 230 financial arrangement
This section applies if:
(a) section 57-32 was applied to work out the market value of an asset (the subject asset ); and
(b) the transition taxpayer is a party to the Division 230 financial arrangement (the financial arrangement ) to which the subject asset, or the corresponding liability for the subject asset, is or is part of; and
(c) a balancing adjustment is made under Subdivision 230-G of the Income Tax Assessment Act 1997 , after the transition time, in relation to the financial arrangement.
57-135(2)
For the purposes of making the balancing adjustment under Subdivision 230-G of the Income Tax Assessment Act 1997 in relation to the financial arrangement, adjust the amount worked out using the method statement (the method statement ) in subsection 230-445(1) of that Act by:
(a) if the transition taxpayer is the holder of the subject asset - increasing any gain or reducing any loss by the amount worked out under subsection (4) of this section; or
(b) if the transition taxpayer is the holder of the corresponding liability for the subject asset - reducing any gain or increasing any loss by the amount worked out under subsection (4) of this section.
57-135(3)
Despite subsection (2):
(a) if the amount worked out under subsection (4) exceeds the amount of the loss to be reduced under paragraph (2)(a) - the transition taxpayer is taken, for the purposes of making the balancing adjustment, to have made a gain equal to the amount of the excess; or
(b) if the amount worked out under subsection (4) exceeds the amount of the gain to be reduced under paragraph (2)(b) - the transition taxpayer is taken, for the purposes of making the balancing adjustment, to have made a loss equal to the amount of the excess; or
(c) if when applying the method statement no balancing adjustment is made in relation to the financial arrangement - the transition taxpayer is taken, for the purposes of making the balancing adjustment, to have:
(i) if the transition taxpayer is the holder of the subject asset - made a gain equal to the amount worked out under subsection (4); or
(ii) if the transition taxpayer is the holder of the corresponding liability for the subject asset - made a loss equal to the amount worked out under subsection (4).
57-135(4)
For the purposes of subsections (2) and (3), the amount is the difference between:
(a) the amount that the transition taxpayer would need to receive or pay under the financial arrangement without an amount being assessable income of, or deductible to, the transition taxpayer if the subject asset, or the corresponding liability for the subject asset, were disposed of at the time the balancing adjustment is made; and
(b) the amount that the transition taxpayer would need to receive or pay under the financial arrangement without an amount being assessable income of, or deductible to, the transition taxpayer if:
(i) the subject asset, or the corresponding liability for the subject asset, were disposed of at the time the balancing adjustment is made; and
(ii) the assumptions in subsection (5) were made.
57-135(5)
The assumptions referred to in subparagraph (4)(b)(ii) are that, when the financial arrangement was entered into:
(a) the parties to the arrangement were dealing with each other at arm ' s length (within the meaning of the Income Tax Assessment Act 1997 ) in relation to the arrangement; and
(b) if the arrangement gives rise to an interest that is not an equity interest in an entity - the return on the interest would reasonably be expected to be equal to the benchmark rate of return (within the meaning of the Income Tax Assessment Act 1997 ) for the interest.
57-135(6)
This section applies despite section 230-510 of the Income Tax Assessment Act 1997 .
(Repealed by No 79 of 2010 )
If there is a change in ownership or control of a trust or an abnormal trading in its units, it:
This will not be the case if the trust is an excepted trust. However, if it became one by making a family trust election, a special tax may be payable on certain distributions and other amounts.
If a trust is involved in a scheme to take advantage of deductions, it may be prevented from making full use of them.
This Division is about the income tax consequences, for various kinds of fixed trusts, of certain events:
An ordinary fixed trust:
unless there has been continuity of ownership throughout a particular period or an exception relating to holdings by non-fixed trusts applies.
Note:
The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415-25 and 415-30 of the Income Tax Assessment Act 1997 .
Type of trust to which this section applies
266-25(1)
This section applies to a trust that:
(a) can deduct in the income year a tax loss from a loss year; and
(b) was a fixed trust at all times in the period (the test period ) from the beginning of the loss year until the end of the income year; and
(c) was not a widely held unit trust at all times in the test period; and
(d) was not an excepted trust at all times in the test period.
To find out the meaning of fixed trust : see section 272-65 .
To find out the meaning of widely held unit trust : see section 272-105 .
To find out the meaning of excepted trust : see section 272-100 .
Condition for deducting tax loss
266-25(2)
The trust cannot deduct the tax loss unless it meets either:
A trust that:
(a) was a fixed trust at all times in the income year (the test period ); and
(b) was not a widely held unit trust at all times in the test period; and
(c) was not an excepted trust at all times in the test period;
must work out its net income and tax loss for the income year under Division 268 (How to work out a trust ' s net income and tax loss for the income year), unless it meets either:
Note:
See section 415-25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.
Type of trust to which this section applies
266-35(1)
This section applies to a trust that:
(a) can deduct in the income year an amount:
(i) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or
(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and
(b) was a fixed trust at all times in the period (the test period ):
(i) if the debt was incurred in an earlier income year - beginning on the day the debt was incurred and ending at the end of the income year; or
(ii) if the debt was incurred in the income year - consisting of the income year; and
(c) was not a widely held unit trust at all times in the test period; and
(d) was not an excepted trust at all times in the test period.
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.
Condition for deducting amount
266-35(2)
The trust cannot deduct the amount unless it meets either:
The fixed trust must pass the 50% stake test for the test period.
To find out whether the trust passes the 50% stake test for the period: see Subdivision 269-C .
If the condition in section 266-40 is not met, the trust must satisfy the conditions in this section.
First condition
266-45(2)
At all times during the test period:
(a) non-fixed trusts (other than family trusts) must have held fixed entitlements to a 50% or greater share of the income or a 50% or greater share of the capital of the trust; or
(b) both:
(i) a fixed trust or a company (which trust or company is the holding entity ) must have held, directly or indirectly, all of the fixed entitlements to income and capital of the trust; and
(ii) non-fixed trusts (other than family trusts) must have held fixed entitlements to a 50% or greater share of the income or a 50% or greater share of the capital of the holding entity.
Second condition
266-45(3)
The persons holding fixed entitlements to shares of the income, and the persons holding fixed entitlements to shares of the capital, of:
(a) in a paragraph (2)(a) case - the trust; or
(b) in a paragraph (2)(b) case - the holding entity;
at the beginning of the test period must have held those entitlements to those shares at all times during the test period.
Third condition
266-45(4)
At the beginning of the test period:
(a) individuals must not have had more than a 50% stake in the income of the trust; or
(b) individuals must not have had more than a 50% stake in the capital of the trust.
Fourth condition
266-45(5)
It must be the case that, for each non-fixed trust (other than an excepted trust) that, at any time in the test period, held directly or indirectly a fixed entitlement to a share of the income or capital of the trust:
(a) if this section is being applied for the purposes of section 266-25 - section 267-20 would not have prevented the non-fixed trust from deducting the tax loss concerned if it, rather than the fixed trust, had incurred the loss; or
(b) if this section is being applied for the purposes of section 266-30 - section 267-60 does not require the non-fixed trust to work out its net income and tax loss for the income year under Division 268 ; or
(c) if this section is being applied for the purposes of section 266-35 - section 267-25 , or section 267-65 , as the case requires, would not have prevented the non-fixed trust from deducting the amount concerned if it, rather than the fixed trust, would otherwise be entitled to deduct the amount.
If section 266-25 prevents the fixed trust from deducting a tax loss, it can deduct the part of the tax loss that is attributable to a part of the loss year.
266-50(2)
However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of sections 266-40 and 266-45 , the trust would have been entitled to deduct the tax loss.
Notice about non-resident non-fixed trust
266-55(1)
The Commissioner may give the trustee of a fixed trust a notice in accordance with section 266-60 if the requirements of subsections (2) to (5) of this section are met.
First requirement
266-55(2)
In its return of income for an income year, the fixed trust:
(a) must have deducted a tax loss from an earlier income year; or
(b) must not have worked out its net income and tax loss for the income year under Division 268 ; or
(c) must have deducted an amount in relation to a debt;
where it would not be allowed to deduct the tax loss or amount in respect of the debt, or would be required to work out its net income and tax loss under that Division, unless it met the conditions in section 266-45 .
Second requirement
266-55(3)
In order to determine whether it meets the conditions in section 266-45 , the Commissioner must need information about a non-fixed trust mentioned in subsection 266-45(5) .
Third requirement
266-55(4)
When the Commissioner gives the notice:
(a) a trustee of the non-fixed trust must be a non-resident; or
(b) the central management and control of the non-fixed trust must be outside Australia.
Fourth requirement
266-55(5)
The Commissioner must give the notice before the later of:
(a) 5 years after the end of the income year mentioned in subsection (2); and
(b) the end of the period during which the trustee of the fixed trust is required by section 262A to retain records in relation to that income year.
Information required
266-60(1)
The notice that the Commissioner may give if the requirements of subsections 266-55(2) to (5) are met must require the trustee to give the Commissioner specified information that is relevant to determining whether the requirements of subsection 266-45(5) are satisfied in relation to the non-fixed trust mentioned in subsections 266-55(3) and (4) .
Trustee knowledge
266-60(2)
The information need not be within the knowledge of the trustee at the time the notice is given.
Period for giving information
266-60(3)
The notice must specify a period within which the trustee is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.
Consequence of not giving the information
266-60(4)
If the trustee does not give the information within the period or within such further period as the Commissioner allows, the fixed trust is taken not to meet, and never to have met, the conditions in section 266-45 .
Application of Division 268
266-60(5)
If, because of subsection (4), the fixed trust is required to work out under Division 268 its net income and tax loss for the income year mentioned in subsection 266-55(2) , that Division is to be applied as if Subdivision 268-B required the income year to be divided into such periods as would result in the highest possible net income for the income year.
No offences or penalties
266-60(6)
To avoid doubt, subsections (4) and (5) do not cause the trustee of the fixed trust to commit any offence or be liable to any penalty under Part 4-25 in Schedule 1 to the Taxation Administration Act 1953 for deducting the amount concerned, or for not working out the trust ' s net income and tax loss under Division 268 , in its return.
An unlisted widely held trust:
unless its ownership has been the same after any abnormal trading in its units and at the end of income years, during a certain period.
Note:
The exception mentioned in this section applies differently in relation to designated infrastructure project entities: see sections 415-25 and 415-30 of the Income Tax Assessment Act 1997 .
Type of trust to which this section applies - case 1
266-75(1)
This section applies to a trust that:
(a) can in the income year deduct a tax loss from a loss year; and
(b) was an unlisted widely held trust at all times in the period (the test period ) from the beginning of the loss year until the end of the income year; and
(c) was not a wholesale widely held trust at all times in the test period; and
(d) was not an unlisted very widely held trust at all times in the test period; and
(e) was not an excepted trust at all times in the test period.
To find out the meaning of unlisted widely held trust : see section 272-110 .
To find out the meaning of wholesale widely held trust : see section 272-125 .
To find out the meaning of unlisted very widely held trust : see section 272-120 .
To find out the meaning of excepted trust : see section 272-100 .
Type of trust to which this section applies - case 2
266-75(2)
This section also applies to a trust that:
(a) can in the income year deduct a tax loss from a loss year; and
(b) was an unlisted widely held trust, other than an unlisted very widely held trust or a wholesale widely held trust, at some time in the period (the test period ) from the beginning of the loss year until the end of the income year; and
(c) was a listed widely held trust at all other times in the test period; and
(d) was not an excepted trust at all times in the test period.
To find out the meaning of listed widely held trust : see section 272-115 .
Condition for deducting tax loss
266-75(3)
The trust cannot deduct the tax loss unless it meets the condition in section 266-90 .
Type of trust to which this section applies - case 1
266-80(1)
A trust that:
(a) was an unlisted widely held trust at all times in the income year (the test period ); and
(b) was not a wholesale widely held trust at all times in the test period; and
(c) was not an unlisted very widely held trust at all times in the test period; and
(d) was not an excepted trust at all times in the test period;
must work out its net income and tax loss for the income year under Division 268 (How to work out a trust ' s net income and tax loss for the income year), unless it meets the condition in section 266-90 .
Type of trust to which this section applies - case 2
266-80(2)
A trust that:
(a) was an unlisted widely held trust, other than an unlisted very widely held trust or a wholesale widely held trust, at some time in the income year (the test period ); and
(b) was a listed widely held trust at all other times in the test period; and
(c) was not an excepted trust at all times in the test period;
must work out its net income and tax loss for the income year under Division 268 (How to work out a trust ' s net income and tax loss for the income year), unless it meets the condition in section 266-90 .
Note:
See section 415-25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.
Type of trust to which this section applies - case 1
266-85(1)
This section applies to a trust that:
(a) can deduct in the income year an amount:
(i) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or
(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and
(b) was an unlisted widely held trust at all times in the period (the test period ):
(i) if the debt was incurred in an earlier income year - beginning on the day the debt was incurred and ending at the end of the income year; or
(ii) if the debt was incurred in the income year - consisting of the income year; and
(c) was not a wholesale widely held trust at all times in the test period; and
(d) was not an unlisted very widely held unit trust at all times in the test period; and
(e) was not an excepted trust at all times in the test period.
Type of trust to which this section applies - case 2
266-85(2)
This section also applies to a trust that:
(a) can deduct in the income year an amount:
(i) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or
(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and
(b) was an unlisted widely held trust, other than an unlisted very widely held trust or a wholesale widely held trust, at some time in the period (the test period ):
(i) if the debt was incurred in an earlier income year - beginning on the day the debt was incurred and ending at the end of the income year; or
(ii) if the debt was incurred in the income year - consisting of the income year; and
(c) was a listed widely held trust at all other times in the test period; and
(d) was not an excepted trust at all times in the test period.
Condition for deducting amount
266-85(3)
The trust cannot deduct the amount unless it meets the condition in section 266-90 .
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.
If this section is being applied for the purposes of section 266-75 or 266-85 , on each occasion when either of the following events occurs:
(a) an abnormal trading in the trust ' s units occurs during the test period;
(b) an income year of the trust ends during the test period (including at the end of the test period);
the trust must pass the 50% stake test in respect of the following times:
(c) the beginning of the test period;
(d) immediately after the event occurs.
To find out whether the trust passes the 50% stake test: see Subdivision 269-C .
266-90(2)
If this section is being applied for the purposes of section 266-80 , on each occasion when an abnormal trading in the trust ' s units occurs during the test period, the trust must pass the 50% stake test in respect of the following times:
(a) the beginning of the test period; and
(b) immediately after the abnormal trading occurs.
If section 266-75 prevents the trust from deducting a tax loss, it can deduct the part of the tax loss that is attributable to a part of the loss year.
266-95(2)
However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of section 266-90 , the trust would have been entitled to deduct the tax loss.
A listed widely held trust:
unless either:
Also, it may still be prevented from deducting the tax loss to the extent that it is attributable to certain debt deductions.
Note:
The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415-25 and 415-30 of the Income Tax Assessment Act 1997 .
Type of trust to which this section applies
266-110(1)
This section applies to a trust that:
(a) can in the income year deduct a tax loss from a loss year; and
(b) was a listed widely held trust at all times in the period (the test period ) from the beginning of the loss year until the end of the income year; and
(c) was not an excepted trust at all times in the test period.
To find out the meaning of listed widely held trust : see section 272-115 .
To find out the meaning of excepted trust : see section 272-100 .
Condition for deducting tax loss
266-110(2)
The trust cannot deduct the tax loss unless it meets either:
Additional restriction on deducting tax loss
266-110(3)
Even if it meets either of the conditions, it still cannot deduct the tax loss, or part of the tax loss, if section 266-135 (which deals with certain debt deductions) prevents it from doing so.
A trust that:
(a) was a listed widely held trust at all times in the income year (the test period ); and
(b) was not an excepted trust at all times in the test period;
must work out its net income and tax loss for the income year under Division 268 (How to work out a trust ' s net income and tax loss for the income year), unless it meets either:
Note:
See section 415-25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.
Type of trust to which this section applies
266-120(1)
This section applies to a trust that:
(a) can deduct in the income year an amount:
(i) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or
(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and
(b) was a listed widely held trust at all times in the period (the test period ):
(i) if the debt was incurred in an earlier income year - beginning on the day the debt was incurred and ending at the end of the income year; or
(ii) if the debt was incurred in the income year - consisting of the income year; and
(c) was not an excepted trust at all times in the test period.
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.
Condition for deducting amount
266-120(2)
The trust cannot deduct the amount unless it meets either:
There must be no abnormal trading in the trust ' s units during the test period.
To find out the meaning of abnormal trading : see Subdivision 269-B .
266-125(2)
If there is abnormal trading on one or more occasions, then either:
(a) for each abnormal trading, the trust must pass the 50% stake test in respect of the following times:
(i) the beginning of the test period;
(ii) immediately after the abnormal trading; or
(b) if it does not, at all times after the first or only abnormal trading in respect of which the requirement in paragraph (a) is not satisfied and before the end of the test period, the trust must pass the business continuity test in relation to the time immediately before that abnormal trading.
To find out whether the trust passes the 50% stake test: see Subdivision 269-C .
To find out whether the trust passes the business continuity test: see Subdivision 269-F .
If section 266-110 prevents the trust from deducting a tax loss, it can deduct the part of the tax loss that is attributable to a part of the loss year.
266-130(2)
However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of section 266-125 , the trust would have been entitled to deduct the tax loss.
266-130(3)
Also, the trust cannot deduct the part of the tax loss, or some of it, if section 266-135 (which deals with certain debt deductions) prevents it from doing so.
Section applies after sections 266-110 and 266-130
266-135(1)
This section applies if, after applying sections 266-110 and 266-130 , a trust can deduct in the income year the whole or part (the otherwise-deductible loss ) of a tax loss from a loss year.
Trust must satisfy condition if debt deduction etc.
266-135(2)
If:
(a) there would have been no otherwise-deductible loss, or its amount would have been smaller, if the trust had not (after applying section 266-120 ) been able to deduct in the loss year an amount:
(i) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or
(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and
(b) the trust could only deduct the amount in respect of the debt because it passed the business continuity test as mentioned in paragraph 266-125(2)(b) ; and
(c) the Commissioner considers that the trust passed the business continuity test as mentioned in that paragraph for the purpose, or for purposes including the purpose, of being able to deduct the amount because of that paragraph;
the trust cannot deduct the otherwise-deductible loss, or can only deduct the smaller amount mentioned in paragraph (a) of this section, unless it meets the condition in subsection (3).
Condition
266-135(3)
The condition is that, at all times after the abnormal trading mentioned in paragraph 266-125(2)(b) and before the end of the income year, the trust must pass the business continuity test in relation to the time immediately before the abnormal trading.
An unlisted very widely held trust or a wholesale widely held trust:
unless either:
Note:
The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415-25 and 415-30 of the Income Tax Assessment Act 1997 .
If a trust is covered by subsection (2), it cannot deduct in the income year a tax loss from a loss year unless it meets either:
266-150(2)
A trust is covered by this subsection if:
(a) in the period (the test period ) from the later of:
(i) the beginning of the loss year; and
until the end of the income year, the trust:
(ii) the end of any start-up period (within the meaning of subsection 272-120 (3));
(iii) was at all times an unlisted very widely held trust; or
(iv) was at all times a wholesale widely held trust; or
(v) was at some time an unlisted very widely held trust and, at any time when it was not, was a wholesale widely held trust or a listed widely held trust; or
(vi) was at some time a wholesale widely held trust and, at any time when it was not, was an unlisted very widely held trust or a listed widely held trust; and
(b) in the test period, the trust was not at all times an excepted trust.
To find out the meaning of unlisted very widely held trust : see section 272-120 .
To find out the meaning of wholesale widely held trust : see section 272-125 .
To find out the meaning of excepted trust : see section 272-100 .
To find out the meaning of listed widely held trust : see section 272-115 .
If a trust is covered by subsection (2), it must work out its net income and tax loss for the income year under Division 268 (How to work out a trust ' s net income and tax loss for the income year), unless it meets either:
266-155(2)
A trust is covered by this subsection if:
(a) in the period (the test period ) consisting of so much of the income year as occurs after the end of any start-up period (within the meaning of subsection 272-120 (3)), the trust:
(i) was at all times an unlisted very widely held trust; or
(ii) was at all times a wholesale widely held trust; or
(iii) was at some time an unlisted very widely held trust and, at any time when it was not, was a wholesale widely held trust or a listed widely held trust; or
(iv) was at some time a wholesale widely held trust and, at any time when it was not, was an unlisted very widely held trust or a listed widely held trust; and
(b) in the test period, the trust was not at all times an excepted trust.
Note:
See section 415-25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.
If a trust is covered by subsection (2), it cannot deduct in the income year an amount:
(a) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or
(b) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt;
unless it meets either:
266-160(2)
A trust is covered by this subsection if:
(a) in the period (the test period ) from the later of the end of any start-up period (within the meaning of subsection 272-120 (3)) and the beginning of:
(i) if the debt was incurred in an earlier income year - the day on which the debt was incurred; or
until the end of the income year, the trust:
(ii) if the debt was incurred in the income year - the income year;
(iii) was at all times an unlisted very widely held trust; or
(iv) was at all times a wholesale widely held trust; or
(v) was at some time an unlisted very widely held trust and, at any time when it was not, was a wholesale widely held trust or a listed widely held trust; or
(vi) was at some time a wholesale widely held trustand, at any time when it was not, was an unlisted very widely held trust or a listed widely held trust; and
(b) in the test period, the trust was not at all times an excepted trust.
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.
There must be no abnormal trading in the units of the trust during the test period.
To find out the meaning of abnormal trading : see Subdivision 269-B .
266-165(2)
If there is abnormal trading on one or more occasions, then for each abnormal trading the trust must pass the 50% stake test in respect of the following times:
(a) the beginning of the test period;
(b) immediately after the abnormal trading.
To find out whether the trust passes the 50% stake test: see Subdivision 269-C .
If section 266-150 prevents the trust from deducting a tax loss, it can deduct the part of the tax loss that is attributable to a part of the loss year.
266-170(2)
However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of section 266-165 , the trust would have been entitled to deduct the tax loss.
If a trust would only avoid the tax consequences of this Division because of interests held by a non-resident family trust, the Commissioner may require the trust to give certain information about the non-resident family trust. If it is not given, the trust does not avoid the tax consequences of this Division.
Notice about family trust
266-180(1)
The Commissioner may give the trustee of a trust (the primary trust ) a notice in accordance with section 266-185 if the requirements of subsections (2) to (5) of this section are met.
First requirement
266-180(2)
In its return of income for an income year, the primary trust:
(a) must have deducted a tax loss from an earlier income year; or
(b) must not have worked out its net income and tax loss for the income year under Division 268 ; or
(c) must have deducted an amount in relation to a debt;
where it would not be allowed to deduct the tax loss or amount in respect of the debt, or would be required to work out its net income and tax loss under that Division, if it did not meet acondition or conditions as mentioned in section 266-40 , 266-45 , 266-90 , 266-125 or 266-165 (the conditions provision ).
Second requirement
266-180(3)
The Commissioner must be satisfied that the primary trust would not meet the condition or conditions if one or more trusts were not family trusts.
Third requirement
266-180(4)
When the Commissioner gives the notice, for at least one of the family trusts:
(a) a trustee of the trust must be a non-resident; or
(b) the central management and control of the trust must be outside Australia.
Fourth requirement
266-180(5)
The Commissioner must give the notice before the later of:
(a) 5 years after the end of the income year to which the return relates; and
(b) the end of the period during which the trustee of the primary trust is required by section 262A to retain records in relation to that income year.
Information required
266-185(1)
The notice that the Commissioner may give if the requirements of subsections 266-180(2) to (5) are met must require the trustee of the primary trust to give the Commissioner specified information about conferrals of present entitlements to, and distributions of, income and capital, since the beginning of the test period mentioned in the conditions provision, by all of the family trusts meeting the requirements of paragraph 266-180(4)(a) or (b) .
Trustee knowledge
266-185(2)
The information need not be within the knowledge of the trustee at the time the notice is given.
Period for giving information
266-185(3)
The notice must specify a period within which the trustee is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.
Consequence of not giving the information
266-185(4)
If the trustee does not give the information within the period or within such further period as the Commissioner allows, the primary trust is taken not to meet, and never to have met, the condition or conditions in the conditions provision.
266-185(5)
If, because of subsection (4), the fixed trust is required to work out under Division 268 its net income and tax loss for the income year mentioned in subsection 266-180(2) , that Division is to be applied as if Subdivision 268-B required the income year to be divided into such periods as would result in the highest possible net income for the income year.
No offences or penalties
266-185(6)
To avoid doubt, subsections (4) and (5) do not cause the trustee of the primary trust to commit any offence or be liable to any penalty under Part 4-25 in Schedule 1 to the Taxation Administration Act 1953 for deducting the amount concerned, or for not working out the trust ' s net income and tax loss under Division 268 , in the trust ' s return.
This Division is about the income tax consequences for a non-fixed trust if its ownership or control changes.
A non-fixed trust cannot deduct:
unless:
Note:
The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415-25 and 415-30 of the Income Tax Assessment Act 1997 .
Type of trust to which this Subdivision applies
267-20(1)
This section applies to a trust that:
(a) can deduct in the income year a tax loss from a loss year; and
(b) was a non-fixed trust at any time in the period (the test period ) from the beginning of the loss year until the end of the income year; and
(c) was not an excepted trust at all times in the test period.
To find out the meaning of non-fixed trust : see section 272-70 .
To find out the meaning of excepted trust : see section 272-100 .
Conditions for deducting tax loss
267-20(2)
The trust cannot deduct the tax loss unless it meets:
Type of trust to which this section applies
267-25(1)
This section applies to a trust that:
(a) can deduct in the income year an amount:
(i) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt, incurred in an earlier income year, as bad; or
(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt incurred in an earlier income year; and
(b) was a non-fixed trust at any time in the period (the test period ) beginning on the day the debt was incurred and ending at the end of the income year; and
(c) was not an excepted trust at all times in the test period.
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.
Condition for deducting amount
267-25(2)
The trust cannot deduct the amount unless it meets:
When trust must meet the condition
267-30(1)
If either or both of the following happened, the trust must meet the condition in subsection (2):
(a) the trust distributed income:
(i) in the income year or within 2 months after its end; and
(ii) in at least one of the 6 earlier income years; or
(b) the trust distributed capital:
(i) in the income year or within 2 months after its end; and
(ii) in at least one of the 6 earlier income years.
The condition
267-30(2)
The condition is that the trust must pass the pattern of distributions test for the income year.
To find out whether the trust passes the pattern of distributions test for the income year: see Subdivision 269-D .
The trust must not have been prevented from deducting the tax loss in an earlier income year because of a failure to meet the condition in subsection 267-30(2) or conditions that included that condition.
When trust must meet condition
267-40(1)
If at any time (the test time ) in the test period, individuals (the threshold group ) have more than a 50% stake in the income or capital of the trust, the trust must meet the condition in subsection (2).
To find out whether individuals have more than a 50% stake in the income or capital of the trust: see Subdivision 269-C .
Condition
267-40(2)
The condition is that, during the period beginning at the test time and finishing at the end of the test period, the same individuals (who must be some or all of the threshold group) must have had more than a 50% stake in the income or the capital, respectively, of the trust.
Commissioner discretion
267-40(3)
If:
(a) after the test time, some or all of the threshold group cease to have a 50% stake in the income or capital of the trust at a particular time; and
(b) having regard to the likely manner of exercise of any discretion of the trustee to distribute income or capital of the trust after the particular time and to any other relevant matter, the Commissioner considers it fair and reasonable that the individuals should be taken to have the stake at the particular time and at all later times in the test period;
the individuals are taken to have that stake at the particular time and at all later times in the test period.
A group must not, during the test period, begin to control the trust directly or indirectly.
To find out what it means for a group to control the trust: see Subdivision 269-E .
If section 267-20 prevents a trust from deducting a tax loss because the trust does not meet the condition in section 267-40 or 267-45 or both conditions, it can deduct the part of the tax loss that is attributable to a part of the loss year.
267-50(2)
However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of sections 267-40 and 267-45 , the trust would have been entitled to deduct the tax loss.
A non-fixed trust:
unless:
Note:
The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415-25 and 415-30 of the Income Tax Assessment Act 1997 .
A trust that:
(a) was a non-fixed trust at any time in the income year (the test period ); and
(b) was not an excepted trust at all times in the test period;
must work out its net income and tax loss for the income year under Division 268 (How to work out a trust ' s net income and tax loss for the income year), unless it meets:
To find out the meaning of excepted trust : see section 272-100 .
Note:
See section 415-25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.
Type of trust to which this section applies
267-65(1)
This section applies to a trust that:
(a) can deduct in the income year (the test period ) an amount:
(i) under section 51 or 63 in respect of the writing off of the whole or part of a debt, incurred in the income year, as bad; or
(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt incurred in the income year; and
(b) was a non-fixed trust at any time in the test period; and
(c) was not an excepted trust at all times in the test period.
Note:
Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.
Condition for deducting amount
267-65(2)
The trust cannot deduct the amount unless it meets:
When trust must meet condition
267-70(1)
If at any time (the test time ) in the test period, individuals (the threshold group ) have more than a 50% stake in the income or capital of the trust, the trust must meet the condition in subsection (2).
To find out whether individuals have more than a 50% stake in the income or capital of the trust: see Subdivision 268-C .
Condition
267-70(2)
The condition is that, during the period beginning at the test time and finishing at the end of the test period, the same individuals (who must be some or all of the threshold group) must have more than a 50% stake in the income or the capital, respectively, of the trust.
Commissioner discretion
267-70(3)
If:
(a) after the test time, some or all of the threshold group cease to have a 50% stake in the income or capital of the trust at a particular time; and
(b) having regard to the likely manner of exercise of any discretion of the trustee to distribute income or capital of the trust after the particular time and to any other relevant matter, the Commissioner considers it fair and reasonable that the individuals should be taken to have the stake at the particular time and at all later times in the test period;
the individuals are taken to have that stake at the particular time and at all later times in the test period.
A group must not, during the test period, begin to control the trust directly or indirectly.
To find out what it means for a group to control the trust: see Subdivision 269-E .
If a trust would only avoid the tax consequences of this Division because of interests held by a non-resident family trust, the Commissioner may require the trust to give certain information about the non-resident family trust. If it is not given, the trust does not avoid the tax consequences of this Division.
Notice about family trust
267-85(1)
The Commissioner may give the trustee of a trust (the primary trust ) a notice in accordance with section 267-90 if the requirements of subsections (2) to (5) of this section are met.
First requirement
267-85(2)
In its return of income for an income year, the primary trust:
(a) must have deducted a tax loss from an earlier income year; or
(b) must not have worked out its net income and tax loss for the income year under Division 268 ; or
(c) must have deducted an amount in relation to a debt;
where it would not be allowed to deduct the tax loss or amount in respect of the debt, or would be required to work out its net income and loss under that Division, if it did not meet a condition or conditions as mentioned in section 267-40 or 267-70 (the conditions provision ).
Second requirement
267-85(3)
The Commissioner must be satisfied that the primary trust would not meet the condition or conditions if one or more trusts were not family trusts.
Third requirement
267-85(4)
When the Commissioner gives the notice, for at least one of the family trusts:
(a) a trustee of the trust must be a non-resident; or
(b) the central management and control of the trust must be outside Australia.
Fourth requirement
267-85(5)
The Commissioner must give the notice before the later of:
(a) 5 years after the end of the income year to which the return relates; and
(b) the end of the period during which the trustee of the primary trust is required by section 262A to retain records in relation to that income year.
Information required
267-90(1)
The notice that the Commissioner may give if the requirements of subsections 267-85(2) to (5) are met must require the trustee to give the Commissioner specified information about conferrals of present entitlements to, and distributions of, income and capital, since the beginning of the test period mentioned in the conditions provision, by all of the family trusts meeting the requirements of paragraph 267-85(4)(a) or (b) .
Trustee knowledge
267-90(2)
The information need not be within the knowledge of the trustee at the time the notice is given.
Period for giving information
267-90(3)
The notice must specify a period within which the trustee is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.
Consequence of not giving the information
267-90(4)
If the trustee does not give the information within the period or within such further period as the Commissioner allows, the primary trust is taken not to meet, and never to have met, the condition or conditions in the conditions provision.
Application of Division 268
267-90(5)
If, because of subsection (4), the fixed trust is required to work out under Division 268 its net income and tax loss for the income year mentioned in subsection 267-85(2) , that Division is to be applied as if Subdivision 268-B required the income year to be divided into such periods as would result in the highest possible net income for the income year.
No offences or penalties
267-90(6)
To avoid doubt, subsections (4) and (5) do not cause the trustee of the primary trust to commit any offence or be liable to any penalty under Part VII for deducting the amount concerned, or for not working out the trust ' s net income and tax loss under Division 268 , in the trust ' s return.
This Division requires a trust ' s net income and tax loss to be worked out in a special way. The income year is divided into periods as the basis for the calculation.
If:
(a) a trust ' s net income and tax loss for the income year are required by section 266-30 to be worked out under this Division; and
(b) the trust did not meet the requirements of subsections 266-45(2) and (4) ;
the income year is divided into periods as follows.
268-10(2)
The first period begins at the beginning of the income year. Each later period begins immediately after the end of the previous period.
268-10(3)
The last period ends at the end of the income year. Each period (except the last) ends at the latest time that would result in the trust passing the 50% stake test for the whole of the period.
If:
(a) a trust ' s net income and tax loss for the income year are required by section 266-30 to be worked out under this Division; and
(b) the trust met the requirements of subsections 266-45(2) and (4) ;
the income year is divided into periods as follows.
268-15(2)
The first period begins at the beginning of the income year. Each later period begins immediately after the end of the previous period.
268-15(3)
The last period ends at the end of the income year. Each period (except the last) ends at the earliest of:
(a) the latest time that would result in the persons holding fixed entitlements to shares of the income or shares of the capital of:
(i) if the trust met the requirements of paragraph 266-45(2)(a) - the trust; or
and the percentages of the shares that they hold, remaining the same during the whole of the period; and
(ii) if the trust met the requirements of paragraph 266-45(2)(b) - the holding entity mentioned in that paragraph;
(b) the times that, for all of the non-fixed trusts (other than excepted trusts) holding directly or indirectly a fixed entitlement to a share of the income or capital of the trust at any time during the income year, are the latest times that would result in individuals having more than a 50% stake in their income or capital; and
(c) the earliest time in the period when a group begins to control a non-fixed trust (other than an excepted trust) that holds directly or indirectly a fixed entitlement to a share of the income or capital of the trust at any time during the income year.
To find out when a group begins to control a trust: see Subdivision 269-E .
If a trust ' s net income and tax loss for the income year are required by section 266-80 , 266-115 or 266-155 to be worked out under this Division, the income year is divided into periods as follows.
268-20(2)
The first period begins at the beginning of the income year. Each later period begins immediately after the end of the previous period.
268-20(3)
The last period ends at the end of the income year. Each period (except the last) ends at the earliest time at which there is an abnormal trading in the trust ' s units, where the trust does not pass the 50% stake test in respect of the following times:
(a) the beginning of the period;
(b) immediately after the abnormal trading.
268-20(4)
However, what would, apart from this subsection, be 2 or more successive periods are treated as a single period if:
(a) the trust is a listed widely held trust; and
(b) during all of the periods the trust passed the business continuity test in relation to the time immediately before the end of the first of the successive periods.
If a trust ' s net income and tax loss for the income year are required by section 267-60 to be worked out under this Division, the income year is divided into periods as follows.
268-25(2)
The first period begins at the beginning of the income year. Each later period begins immediately after the end of the previous period.
268-25(3)
The last period ends at the end of the income year.
268-25(4)
If the condition in subsection 267-70(2) applies but the trust does not meet the condition, each period (except the last) ends at the earlier of:
(a) the latest time, after the test time mentioned in that section, that would result in the same individuals having more than a 50% stake in the income or the capital, as the case requires, of the trust during the whole of the period; or
(b) the earliest time when a group begins to control the trust directly or indirectly.
268-25(5)
If the condition in subsection 267-70(2) does not apply, or does apply and the trust meets the condition, each period (except the last) ends at the earliest time when a group begins to control the trust directly or indirectly.
A notional loss or notional net income of the trust must be worked out for each period into which the income year has been divided in accordance with Subdivision 268-B .
268-30(2)
The trust has a notional loss for a period if the deductions attributed to the period under section 268-35 exceed the assessable income attributed to the period under section 268-40 . The notional loss is the amount of the excess.
For a period during which the trust was in partnership, the notional loss is worked out under Subdivision 268-D .
268-30(3)
On the other hand, if that assessable income exceeds those deductions, the trust has a notional net income for the period, equal to the excess.
For a period during which the trust was in partnership, the notional net income is worked out under Subdivision 268-D .
268-30(4)
If the trust has a notional loss for none of the periods in the income year, this Subdivision has no further application, and the trust ' s net income for the income year is calculated in the usual way.
The usual way of working out net income is set out in section 95.
The trust ' s deductions for the income year are attributed to periods in the income year as follows.
268-35(2)
The following deductions are attributed to each period in proportion to the length of the period:
(a) (Repealed by No 101 of 2006 )
(aa) deductions for the decline in value of a depreciating asset;
See Division 40 of the Income Tax Assessment Act 1997 .
(b) (Repealed by No 101 of 2006 )
(c) deductions for expenditure, deductions for which are spread over 2 or more years, but not full year deductions (see subsection (5));
(d) deductions for expenditure of capital monies in connection with an Australian film.
See former section 124ZAFA .
268-35(3)
All other deductions (except full year deductions) are attributed to periods as if each period were an income year.
268-35(4)
Full year deductions are not attributed to any of the periods. They are brought in at a later stage of the process of calculating the trust ' s net income for the income year.
268-35(5)
These are full year deductions :
(a) deductions for bad debts under section 8-1 (about general deductions) of the Income Tax Assessment Act 1997 ;
(b) deductions for bad debts under section 25-35 (about bad debts) of the Income Tax Assessment Act 1997 , or for losses on debt/equity swaps under section 63E ;
(c) deductions, so far as they are allowable under Division 8 (which is about deductions) of the Income Tax Assessment Act 1997 , because Subdivision H (Period of deductibility of certain advance expenditure) of Division 3 of Part III applies to the trust in relation to the income year;
(d) deductions allowable under Division 30 of the Income Tax Assessment Act 1997 ;
(e) deductions for payments of pensions, gratuities or retiring allowances under section 25-50 of the Income Tax Assessment Act 1997 ;
(f) deductions for tax losses of earlier income years;
See Division 36 of the Income Tax Assessment Act 1997 .
(g) - (h) (Omitted by No 169 of 1999)
(i) (Repealed by No 101 of 2006 )
(j) deductions for farm management deposits.
Note:
See Division 393 of the Income Tax Assessment Act 1997 .
268-35(6)
However, a deduction for the balance of capital expenditure is not a full year deduction if the deduction results from the disposal, loss, lapse, termination of use or destruction of the property.
See Subdivision 40-D of the Income Tax Assessment Act 1997 .
The trust ' s assessable income for the income year is attributed to periods in the income year as follows.
268-40(2)
The following amounts are attributed to periods so far as they are reasonably attributable to those periods:
(a) amounts included in the trust ' s assessable income under section 97 (Beneficiary of a trust estate not under a legal disability); or
(b) amounts included in the trust ' s assessable income under section 98A (Non-resident beneficiaries assessable in respect of certain income).
268-40(3)
The following items of assessable income are attributed to each period in proportion to the length of the period:
(a) insurance recoveries for loss of livestock or trees;
See section 385-130 of the Income Tax Assessment Act 1997 .
(b) amounts included in assessable income as a result of elections relating to the forced disposal of livestock;
See Subdivision 385-E and section 385-160 of the Income Tax Assessment Act 1997 .
(c) recoupment of mains electricity connection expenditure.
See item 1.25 in section 20-30 , which lists deductions for which recoupments are assessable under Subdivision 20-A , of the Income Tax Assessment Act 1997 .
268-40(4)
An amount included in the trust ' s assessable income under section 385-185 (Election to defer including profit on second wool clip) of the Income Tax Assessment Act 1997 is attributed to the period when the wool would ordinarily have been shorn.
268-40(5)
An amount included in the trust ' s assessable income that is a dividend under:
(a) section 65 (Payments to associated persons); or
(b) (Repealed by No 79 of 2007 )
(c) section 109 (Excessive payments to shareholders and associates); or
(d) Division 7A of Part III (Distributions to entities connected with a private company);
is attributed to the period when the amount was paid or credited, whichever occurred first.
268-40(6)
All other items of assessable income (except full year amounts) are attributed to periods as if each period were an income year.
268-40(7)
Full year amounts are amounts referred to in paragraphs (2)(a) and (b), so far as they are not reasonably attributable to a period. They are brought in at a later stage of the process of calculating the trust ' s net income for the income year.
The trust' s net income for the income year is worked out as follows.
268-45(2)
Add up the notional net incomes (if any) worked out under section 268-30 or 268-70.
Note:
A notional loss for a period is not taken into account, but counts towards the trust ' s tax loss for the income year.
268-45(3)
Add the full year amounts referred to in subsection 268-40 (7) (if any).
268-45(4)
Subtract the trust ' s full-year deductions of these kinds:
(a) deductions for bad debts under section 8-1 (about general deductions) of the Income Tax Assessment Act 1997 ;
(b) deductions for bad debts under section 25-35 (about bad debts) of the Income Tax Assessment Act 1997 ;
(c) deductions, so far as they are allowable under Division 8 (which is about deductions) of the Income Tax Assessment Act 1997 because Subdivision H (Period of deductibility of certain advance expenditure) of Division 3 of Part III applies to the trust in relation to the income year;
unless they exceed the total of the notional net incomes and the full year amounts. (If they equal or exceed that total, the trust does not have a net income for the income year.)
268-45(5)
If an amount remains, subtract from it the trust ' s other full year deductions, in the order shown in subsection 268-35 (5), unless they exceed the amount remaining. (If they equal or exceed that amount, the trust does not have a net income for the income year.)
268-45(6)
The amount (if any) remaining is the trust ' s net income for the income year.
For the purposes of Division 36 (Tax losses of earlier income years) of the Income Tax Assessment Act 1997 , instead of working out the trust ' s tax loss for the year under section 36-10 of that Act, it is worked out as follows.
268-60(2)
Total the notional losses.
268-60(3)
Add the amount (if any) by which the trust ' s full year deductions of these kinds:
(a) deductions for bad debts under section 8-1 (about general deductions) of the Income Tax Assessment Act 1997 ;
(b) deductions for bad debts under section 25-35 (about bad debts) of the Income Tax Assessment Act 1997 ;
(c) deductions, so far as they are allowable under Division 8 (which is about deductions) of the Income Tax Assessment Act 1997 because Subdivision H (Period of deductibility of certain advance expenditure) of Division 3 of Part III applies to the trust in relation to the income year;
exceed the total of:
(d) the notional net incomes (if any); and
To work out the notional net income: see sections 268-30 and 268-70 .
(e) the full year amounts referred to in section 268-40 (if any).
268-60(4)
If the trust derived exempt income, subtract its net exempt income as defined in section 36-20 of the Income Tax Assessment Act 1997 .
268-60(5)
Any amount remaining is the trust ' s tax loss for the income year.
To find out how much of the tax loss can be deducted in later income years, see Division 266 or 267 .
To find out how to deduct it, see section 36-15 or 36-17 of the Income Tax Assessment Act 1997 .
(Repealed by No 41 of 1998) Subdivision 268-D - Rules that supplement Subdivision 268-C if the trust is in partnership
This section applies if at any time during a period the trust was a partner in one or more partnerships.
268-70(2)
The trust has a notional loss for the period if the total (the loss total ) of:
(a) the deductions attributed to the period under section 268-35 ; and
(b) the trust ' s share of each notional loss (if any) of a partnership for the period;
exceeds the total (the income total ) of:
(c) the assessable income attributed to the period under section 268-40 ; and
(d) the trust ' s share of each notional net income (if any) of a partnership for the period.
The notional loss is the amount of the excess.
Note:
A notional loss is taken into account in working out the trust ' s tax loss under section 268-60 .
268-70(3)
On the other hand, if the income total exceeds the loss total, the trust has a notional net income for the period, equal to the excess.
Note:
A notional net income is taken into account in working out the trust ' s net income under section 268-45 .
268-70(4)
If the trust has a notional net income for all periods in the income year, this Subdivision has no further application, and the trust ' s net income for the income year is worked out in the usual way.
The usual way of working out net income is set out in section 95.
This section applies if at any time during a period the trust is a partner in a partnership that has an income year that begins and ends when the trust ' s income year begins and ends.
268-75(2)
The partnership ' s notional loss or notional net income for the period is worked out in the same way as the notional loss or notional net income of a trust.
268-75(3)
The trust ' s share is calculated by dividing:
(a) the trust ' s interest in the partnership ' s net income or partnership loss of the income year;
by:
(b) the amount of that net income or partnership loss;
and expressing the result as a percentage.
268-75(4)
However, if the partnership had neither a net income nor a partnership loss, the trust ' s share is a percentage that is fair and reasonable having regard to the extent of the trust ' s interest in the partnership.
This section applies if at any time during a period the trust is a partner in a partnership that has an income year that begins and ends at a different time from when the trust ' s income year begins and ends.
268-80(2)
So much of the partnership ' s net income or partnership loss of an income year as was derived during the period is a notional net income or notional loss of the partnership for the period. (For the purposes of this subsection, the partnership ' s net income or partnership loss is calculated without taking account of the partnership ' s full year deductions for that income year.)
Note:
The partnership ' s full year deductions are dealt with in section 268-85 .
268-80(3)
The trust ' s share is calculated by dividing:
(a) the trust ' s interest in the partnership ' s net income or partnership loss of the income year;
by:
(b) the amount of that net income or partnership loss;
and expressing the result as a percentage.
This section applies if at any time during the income year the trust is a partner in a partnership that has one or more full year deductions for the income year of the partnership that corresponds to the income year of the trust.
268-85(2)
The partnership ' s full year deductions are treated as full year deductions of the trust, but only to the extent of the trust ' s share.
268-85(3)
If the partnership ' s income year is the same as the trust ' s, the trust ' s share is calculated by dividing:
(a) the trust ' s interest in the partnership ' s net income or partnership loss of the income year;
by:
(b) the amount of that net income or partnership loss;
and expressing the result as a percentage.
268-85(4)
However, if the partnership had neither a net income nor a partnership loss, the trust ' s share is a percentage that is fair and reasonable having regard to the extent of the trust ' s interest in the partnership.
268-85(5)
If the partnership ' s income year does not begin and end at the same time as the trust ' s income year, the trust ' s share is a percentage that is fair and reasonable having regard to all relevant circumstances.
This Division explains the following concepts or tests that are used in preceding Divisions of this Schedule:
A trading in units in a unit trust occurs if there is an issue, redemption or transfer of, or other dealing in, the units.
There is an abnormal trading in units in a unit trust if there is a trading in the units that is abnormal having regard to all relevant factors, including:
(a) the timing of the trading, when compared to the normal timing for trading in its units; and
(b) the number of units traded, when compared to the normal number of units traded; and
(c) any connection between the trading and any other trading in units in the trust; and
(d) any connection between the trading and a tax loss or other deduction of the trust.
269-15(2)
There may also be an abnormal trading under any of the following provisions.
There is an abnormal trading in units in a unit trust if a trading occurs in its units that the trustee knows or reasonably suspects is part of an acquisition of the trust or merger of the trust with another trust.
There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if 5% or more of the units are traded in one transaction.
There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if the trustee knows or reasonably suspects that a person, or a person and one or more associates of the person, have acquired or redeemed 5% or more of the units in 2 or more transactions and would not have done so if the trust did not have a tax loss or other deduction.
269-30(2)
For the purposes of other provisions of this Schedule, the abnormal trading occurs at the time of the particular transaction that causes the 5% figure to be exceeded.
There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if more than 20% of the units on issue at the end of any 60 day period were traded during the period.
269-35(2)
For the purposes of other provisions of this Schedule, the abnormal trading occurs at the end of the 60 day period.
There is an abnormal trading in units in a wholesale widely held trust during a period if the trustee knows or reasonably suspects that the same persons did not hold more than 50% of its units at the beginning and end of the period.
269-40(2)
For the purposes of other provisions of this Schedule, the abnormal trading occurs immediately before the end of the period.
For the purposes of section 269-20 , 269-30 or 269-40 , the trustee must have the knowledge or reasonable suspicion mentioned in that section:
(a) if the section is being applied in determining for the purposes of section 268-20 whether an abnormal trading occurred - at some time during the income year mentioned in that section; or
(b) if it is being applied in determining for the purposes of any other provision whether an abnormal trading occurred during a period - at some time during the period.
Holding trust and subsidiary trust
269-47(1)
If a unit trust has fixed entitlements directly or indirectly to all of the income and capital of another unit trust:
(a) the first trust is a holding trust of the second; and
(b) the second is a subsidiary trust of the first.
Abnormal trading causing or ending holding-subsidiary relationship
269-47(2)
The transaction that causes a trust to become, or to cease to be, a holding trust of a subsidiary trust (the bottom subsidiary trust) is an abnormal trading in units in the bottom subsidiary trust unless:
(a) the holding trust is itself a subsidiary trust of one or more holding trusts (each of which is a higher holding trust ); and
(b) immediately before and after the transaction, the bottom subsidiary trust is a subsidiary trust of one or more of the higher holding trusts.
Abnormal trading while holding-subsidiary relationship exists
269-47(3)
While one or more trusts are holding trusts of the same subsidiary trust, there is an abnormal trading in units in the subsidiary trust if and only if, and at the time at which, there is an abnormal trading in units in the holding trust that is not itself a subsidiary trust of another holding trust.
If the issue of units in a unit trust to existing unit holders does not cause each unit holder ' s proportion of the total fixed entitlements to shares of the income and capital of the trust to change, then, except for the purposes of section 269-20 , the issue is disregarded in determining whether there has been an abnormal trading in units in the unit trust.
More than a 50% stake in income
269-50(1)
If there are individuals who have (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of a trust, those individuals have more than a 50% stake in the income of the trust.
More than a 50% stake in capital
269-50(2)
If there are individuals who have (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the trust, those individuals have more than a 50% stake in the capital of the trust.
If, at all times during a period, or at 2 times:
(a) the same individuals have more than a 50% stake in the income of a trust; and
(b) the same individuals (who may be different from those in paragraph (a)) have more than a 50% stake in the capital of the trust;
the trust passes the 50% stake test for the period or in respect of the 2 times.
269-55(2)
If a trust is a widely held unit trust it is taken to pass the 50% stake test for a period or in respect of 2 times if it is reasonable to assume that the requirements of paragraphs (1)(a) and (b) are satisfied in respect of the period or the 2 times.
A trust passes the pattern of distributions test for an income year if, before the end of 2 months after the end of the income year:
(a) the trust distributed directly or indirectly to the same individuals, for their own benefit, a greater than 50% share of all test year distributions of income (see subsection 269-65 (1)); and
(b) the trust distributed directly or indirectly to the same individuals (who may be different from those in paragraph (a)), for their own benefit, a greater than 50% share of all test year distributions of capital (see subsection 269-65 (3)).
Test year distribution of income
269-65(1)
A test year distribution of income is the total of all distributions of income made by the trust in any of the following periods, provided the period does not begin more than 6 years before the beginning of the income year:
(a) the period from the beginning of the income year until 2 months after its end;
(b) if the trust distributed income before the trigger year (see subsection (2)) - the income year, before the trigger year, that is closest to the trigger year;
(c) if paragraph (b) does not apply and the trust distributed income in the trigger year - the trigger year;
(d) if neither paragraph (b) nor paragraph (c) applies - the income year, closest to the trigger year, in which the trust distributed income;
(e) each intervening income year (if any) between the one in paragraph (a) and the one in paragraph (b), (c) or (d).
Trigger year
269-65(2)
If this Subdivision is being applied for the purposes of section 267-20 , the trigger year is the loss year mentioned in that section. If it is being applied for the purposes of section 267-25 , the trigger year is the year in which the debt mentioned in that section was incurred.
Test year distribution of capital
269-65(3)
Subsection (1) applies in the same way to distributions of capital made by the trust, to determine what is a test year distribution of capital .
For the purposes of section 269-60 , if the trust does not distribute to an individual the same percentage of income or capital for every test year distribution, the trust is taken to have distributed to the individual, for every test year distribution, the smallest percentage that it distributed to the individual for any of the test year distributions.
For the purposes of section 269-60 , if, before the end of 2 months after the end of the income year:
(a) the trust has distributed directly or indirectly the whole or part of a test year distribution of income or test year distribution of capital to a company, partnership or trust (the entity ); and
(b) an amount (the undistributed amount ) consisting of the whole or part of the income or capital so distributed to the entity satisfies the following requirements:
(i) the amount has not been distributed by the entity; and
(ii) an individual, directly or indirectly, and for his or her own benefit, has a fixed entitlement to a share of the amount;
the entity is taken to have distributed the share of the undistributed amount to the individual immediately before the end of 2 months after the end of the income year.
For the purposes of section 269-60 , if:
(a) the trust distributes, directly or indirectly to an individual as mentioned in that section, income or capital that is included in a test year distribution; and
(b) a later distribution of income or capital is made that is included in the same or a different test year distribution; and
(c) either the individual dies before the later distribution is made or:
(i) before it is made, there is a breakdown in the marriage or relationship (see section 272-140) of the individual; and
(ii) after the breakdown, no distribution of income or capital of the trust, that is included in a test year distribution, is made directly or indirectly to the individual; and
(iii) it is reasonable to assume that the breakdown in the marriage or relationship is the reason for no such distribution being made;
then subsections (2) and (3) apply.
269-80(2)
No income or capital distributed to the individual by the trust, directly or indirectly as mentioned in section 269-60 , is to be included in any test year distribution.
269-80(3)
If:
(a) the requirements of subsection (1) are met because the individual has died; and
(b) immediately before his or her death, the individual had directly or indirectly, and for his or her own benefit, a fixed entitlement to a share of the income or capital of the trust; and
(c) after the individual ' s death, the fixed entitlement is held by a person as trustee of the individual ' s estate or by a person who received it as a beneficiary of the estate;
no income or capital distributed to the person as such a trustee or beneficiary, directly or indirectly as mentioned in section 269-60 , is to be included in any test year distribution.
The trust is taken for the purposes of section 269-60 not to have distributed, directly or indirectly to an individual, and for the individual ' s own benefit, a share of a test year distribution of income or capital of the trust if the condition in subsection (2) is met.
269-85(2)
The condition is that an arrangement was entered into where:
(a) the arrangement in some way (directly or indirectly) related to, affected or depended for its operation on the share or its value; and
(b) the purpose, or one of the purposes, of the arrangement was to ensure that the trust would meet the condition in subsection 267-30(2) .
Basic meaning
269-95(1)
Subject to this section, a group (see subsection (5)) controls a non-fixed trust if:
(a) the group has the power, by means of the exercise of a power of appointment or revocation or otherwise, to obtain beneficial enjoyment (directly or indirectly) of the capital or income of the trust; or
(b) the group is able (directly or indirectly) to control the application of the capital or income of the trust; or
(c) the group is capable, under a scheme, of gaining the beneficial enjoyment in paragraph (a) or the control in paragraph (b); or
(d) the trustee is accustomed, under an obligation or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the group; or
(e) the group is able to remove or appoint the trustee; or
(f) the group acquires more than a 50% stake in the income or capital of the trust.
Replacement group after death etc.
269-95(2)
The consequences set out in subsection (3) apply if:
(a) a group (the original group ) ceases to control a non-fixed trust only because of the death, incapacitation or breakdown in the marriage or relationship of the individual comprising, or an individual included in, the group; and
(b) another group (the replacement group ) begins to control the trust within the following period (whether or not any other group controlled the trust in the interim):
(i) one year after the death, incapacitation or breakdown in the marriage or relationship; or
(ii) such longer period as the Commissioner determines in relation to the death, incapacitation or breakdown in the marriage or relationship; and
(c) the replacement group consists of:
(i) if the individual who died or became incapacitated or whose marriage or relationship broke down comprised the original group - one or more individuals who are members of the individual ' s family (see section 272-95 ); or
(ii) in any other case - one or more such individuals together with all of the persons who were members of the original group, other than any individual who has died or become incapacitated or whose marriage or relationship has broken down; and
(d) the replacement group began to control the trust only because of the death, incapacitation or breakdown in the marriage or relationship of the individual; and
(e) disregarding any individual who died or became incapacitated or whose marriage or relationship broke down and the one or more individuals covered by paragraph (c) - the beneficiaries of the trust immediately before the original group ceased to control the trust are the beneficiaries of the trust immediately after the replacement group begins to control the trust.
Consequences of subsection (2)
269-95(3)
For the purposes of subsection (2), the consequences are that:
(a) the replacement group is taken to have controlled the trust from the time when the original group began to control it until the time when the replacement group actually began to control it; and
(b) the original group is taken not to have controlled the trust; and
(c) if:
(i) a person or persons (other than a replacement group) began to control the trust at some time during the period from the time the original group ceased to control the trust until the replacement group began to do so; and
(ii) the person or persons began to control the trust only because of the death, incapacitation or breakdown in the marriage or relationship of the individual; and
the person or persons are taken not to have controlled the trust.
(iii) the control did not continue after the replacement group began to control the trust;
Deemed absence of control
269-95(4)
If:
(a) at a particular time, a group controls a non-fixed trust; and
(b) the Commissioner, having regard to:
(i) the identity of the beneficiaries of the trust at any time before and at any time after the group began to control the trust; and
considers that it is reasonable that the group be taken not to control the trust at the particular time;
(ii) all other relevant circumstances;
the group is taken not to control the trust at the particular time.
Group
269-95(5)
A group is:
(a) a person; or
(b) a person and one or more associates; or
(c) 2 or more associates of a person.
Basic meaning
269-100(1)
A listed widely held trust passes the business continuity test during a period (the business continuity test period ) in relation to a time (the test time ) if throughout the business continuity test period it carries on the same business as it carried on immediately before the test time.
Relevance of being a trust
269-100(2)
The mere fact of being a trust does not mean that the trust cannot carry on a business.
First exception
269-100(3)
However, the trust does not pass the business continuity test under this section if, at any time during the business continuity test period, it derives assessable income from:
(a) a business of a kind that it did not carry on before the test time; or
(b) a transaction of a kind that it had not entered into in the course of its business operations before the test time.
Second exception
269-100(4)
The trust also does not pass the business continuity test under this section if, before the test time, it:
(a) began to carry on a business it had not previously carried on; or
(b) in the course of its business operations, entered into a transaction of a kind that it had not previously entered into;
and did so for the purpose, or for purposes including the purpose, of being taken to have carried on throughout the business continuity test period the same business as it carried on immediately before the test time.
Third exception
269-100(5)
So far as the test is applied for the purpose of section 266-115 (Listed widely held trust may be required to work out its net income and tax loss in a special way) and section 268-20 (Widely held unit trust ' s income year to be divided into periods), the trust also does not pass the business continuity test under this section if, at any time during the business continuity test period, it incurs expenditure:
(a) in carrying on a business of a kind that it did not carry on before the test time; or
(b) as a result of a transaction of a kind that it had not entered into in the course of its business operations before the test time.
Cases in which businesses need only be similar
269-105(1)
A listed widely held trust also passes the business continuity test during a period (the business continuity test period ) in relation to a time (the test time ) and in relation to:
(a) a tax loss for a loss year starting on or after 1 July 2015; or
(b) net income for an income year starting on or after 1 July 2015; or
(c) a debt, incurred in an income year starting on or after 1 July 2015, that the trust writes off as bad; or
(d) a debt, incurred in an income year starting on or after 1 July 2015, in relation to which a debt/equity swap (within the meaning of section 63E ) occurs;
if throughout the business continuity test period it carries on a business (its current business ) that is similar to the business it carried on immediately before the test time (its former business ).
Relevance of being a trust
269-105(2)
The mere fact of being a trust does not mean that the trust cannot carry on a business.
Matters to be considered
269-105(3)
Without limiting the matters that may be taken into account in ascertaining whether the trust ' s current business is similar to its former business, the following must be taken into account:
(a) the extent to which the assets (including goodwill) that are used in its current business to generate assessable income throughout the business continuity test period were also used in its former business to generate assessable income;
(b) the extent to which the activities and operations from which its current business generated assessable income throughout the business continuity test period were also the activities and operations from which its former business generated assessable income;
(c) the identity of its current business and the identity of its former business;
(d) the extent to which any changes to its former business result from development or commercialisation of assets, products, processes, services or marketing or organisational methods of the former business.
Exception
269-105(4)
However, the trust does not pass the business continuity test under this section if, before the test time, it:
(a) began to carry on a business it had not previously carried on; or
(b) in the course of its business operations, entered into a transaction of a kind that it had not previously entered into;
and did so for the purpose, or for purposes including the purpose, of being taken to have carried on throughout the business continuity test period a business that is similar to the business it carried on immediately before the test time.
A trust may be prevented from making any use of deductions, or full use of deductions in an income year, if a scheme to take advantage of the deductions exists.
Basic case
270-10(1)
The consequences set out in section 270-15 result if:
(a) a deduction is allowable to a trust for the income year; and
(b) under a scheme, the following happen (in any order):
(i) the trust derives an amount of assessable income (the scheme assessable income ) in the income year; and
(ii) an outsider to the trust (see section 270-25 ) directly or indirectly provides a benefit (see section 270-20 ) to the trustee, to a beneficiary in the trust or to an associate of the trustee or of a beneficiary; and
Note:
The benefit may constitute all or any of the scheme assessable income.
(iii) the trustee, a beneficiary in the trust or an associate of the trustee or of a beneficiary, directly or indirectly provides a benefit to the outsider to the trust or to an associate of the outsider (other than an associate covered by any of paragraphs 270-25(1)(a) to (f)); and
Note:
The benefit may constitute all or any of the deduction.
(c) it is reasonable to conclude that:
(i) the trust derived the scheme assessable income; or
(ii) the outsider provided the benefit as mentioned in subparagraph (b)(ii); or
wholly or partly, but not merely incidentally, because the deduction would be allowable; and
(iii) the trustee, beneficiary or associate provided the benefit as mentioned in subparagraph (b)(iii);
(d) the trust is not an excepted trust under paragraph 272-100(b), (c) or (d) .
Special case
270-10(2)
If:
(a) under a scheme, a person who, before the scheme was entered into, was an outsider to a trust becomes:
(i) the trustee of the trust; or
(ii) a person with a fixed entitlement to a share of the income or capital of the trust; and
(b) if the person had not ceased to be an outsider to the trust, the requirements of subsection (1) would have been satisfied in relation to the scheme;
the requirements of subsection (1) are taken to have been satisfied in relation to the scheme.
If the requirements of subsection 270-10 (1) are satisfied, the consequences are that:
(a) to the extent (if any) that the deduction mentioned in paragraph 270-10(1)(a) relates exclusively, or may appropriately be related, to the scheme assessable income, the deduction is not allowable; and
(b) if the net income of the trust is less than the scheme assessable income or there is no net income - the trust has a net income equal to, or the net income is increased so that it equals, the scheme assessable income; and
(c) paragraph (b) and the scheme assessable income are disregarded in working out any tax loss incurred by the trust in the income year; and
(d) if paragraph (b) applies and the deduction mentioned in paragraph 270-10(1)(a) is for a tax loss - paragraph (b) and the scheme assessable income are disregarded in working out any deduction in respect of the tax loss allowable after the income year.
A benefit is:
(a) money, a dividend or property (whether tangible or intangible); or
(b) a right or entitlement (whether or not property); or
(c) services; or
(d) the extinguishment, forgiveness, release or waiver of a debt or other liability; or
(e) the doing of anything that results in the derivation of assessable income; or
(f) anything that, disregarding the preceding paragraphs, is a benefit or advantage.
Outsider to family trust
270-25(1)
If the trust mentioned in paragraph 270-10(1)(a) is a family trust, an outsider to the trust is a person other than:
(a) the trustee of the trust; or
(b) a person with a fixed entitlement to a share of the income or capital of the trust; or
(c) the individual specified in the trust ' s family trust election; or
(d) a member of the individual ' s family; or
(da) a trust with the same individual specified in its family trust election; or
(e) a company, partnership or trust that made an interposed entity election to be included in the individual ' s family group, where the election was in force (including before it was made) when the scheme mentioned in paragraph 270-10(1)(b) commenced; or
(f) a fixed trust, company or partnership (an entity ) where, at all times while the scheme mentioned in paragraph 270-10(1)(b) was being carried out:
(i) the individual specified in the trust ' s family trust election; or
(ii) one or more members of the individual ' s family; or
or any combination of the above, had fixed entitlements, directly or indirectly, and for their own benefit, to all of the income and capital of the entity.
(iii) the trustees of one or more family trusts, provided the individual is specified in the family trust election of each of those family trusts;
Outsider to non-family trust
270-25(2)
If the trust mentioned in paragraph 270-10(1)(a) is not a family trust, an outsider to the trust is a person other than:
(a) the trustee of the trust; or
(b) a person with a fixed entitlement to a share of the income or capital of the trust.
Basically, if:
and the company, partnership or trust concerned confers a present entitlement to, or distributes, income or capital other than upon or to a specified individual or members of his or her family group, a special tax is payable on the conferral or distribution.
If certain persons do not provide information about conferrals of present entitlements or distributions by non-residents connected with them, the persons may become liable to the special tax on their own conferrals or distributions.
If certain non-residents do not pay the special tax by the due date, other persons connected with them may also become liable to pay a special tax equal to the unpaid amount.
This Division provides for tax to be payable in specified circumstances. The tax is called family trust distribution tax .
This section applies if:
(a) a trustee makes a family trust election in relation to a trust; and
(b) at any time while the election is in force (including a time before it was made), the trust confers a present entitlement to, or distributes, income or capital of the trust:
(i) upon or to a person who is neither the individual specified in the family trust election nor a member of the individual ' s family group in relation to the conferral or distribution; or
(ii) upon or to the individual specified in the election or a member of the individual ' s family group, where the individual or member is the trustee of a trust, or the member is a trust, that is not included in the individual ' s family group in relation to the conferral or distribution.
271-15(2)
If this section applies:
(a) if the trustee is an individual - the trustee is liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital to which the entitlement relates, or that is distributed; or
(b) if the trustee is a company - the trustee, together with each person who was a director of the company at the time of the conferral or distribution, is jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital to which the entitlement relates, or that is distributed.
This section applies if:
(a) the trustee of a trust makes an interposed entity election for the trust to be included in the family group of the individual specified in a family trust election; and
(b) at any time while the election is in force (including a time before it was made), the trust confers a present entitlement to, or distributes, income or capital of the trust:
(i) upon or to a person who is neither the individual specified in the family trust election nor a member of the individual ' s family group in relation to the conferral or distribution; or
(ii) upon or to the individual specified in the election or a member of the individual ' s family group, where the individual or member is the trustee of a trust, or the member is a trust, that is not included in the individual ' s family group in relation to the conferral or distribution.
271-20(2)
If this section applies:
(a) if the trustee is an individual - the trustee is liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital to which the entitlement relates, or that is distributed; or
(b) if the trustee is a company - the trustee, together with each person who was a director of the company at the time of the conferral or distribution, is jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital to which the entitlement relates, or that is distributed.
S 271-20 inserted by No 17 of 1998.
This section applies if:
(a) the partners in a partnership make an interposed entity election for the partnership to be included in the family group of the individual specified in a family trust election; and
(b) at any time while the interposed entity election is in force (including a time before it was made), the partnership confers a present entitlement to, or distributes, income or capital:
(i) upon or to a person who is neither the individual specified in the family trust election nor a member of the individual ' s family group in relation to the conferral or distribution; or
(ii) upon or to the individual specified in the election or a member of the individual ' s family group, where the individual or member is the trustee of a trust, or the member is a trust, that is not included in the individual ' s family group in relation to the conferral or distribution.
271-25(2)
If this section applies, the partners, together with each person who at the time of the conferral or distribution was a director of any partner that was a company, are jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital to which the entitlement relates, or that is distributed.
This section applies if:
(a) a company makes an interposed entity election for the company to be included in the family group of the individual specified in a family trust election; and
(b) at any time while the interposed entity election is in force (including a time before it was made), the company confers a present entitlement to, or distributes, income or capital of the company:
(i) upon or to a person who is neither the individual specified in the family trust election nor a member of the individual ' s family group in relation to the conferral or distribution; or
(ii) upon or to the individual specified in the election or a member of the individual ' s family group, where the individual or member is the trustee of a trust, or the member is a trust, that is not included in the individual ' s family group in relation to the conferral or distribution.
271-30(2)
If this section applies, the company, together with each person who was a director of the company at the time of the conferral or distribution, is jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital to which the entitlement relates, or that is distributed.
If, after conferring a present entitlement to income or capital as mentioned in paragraph 271-15(1)(b) , 271-20(1)(b) , 271-25(1)(b) or 271-30(1)(b) , the trust, partnership or company concerned distributes the income or capital in satisfaction of the entitlement, the distribution is disregarded for the purposes of that paragraph.
This section applies to a director of a company who is included among persons who are jointly and severally liable to pay family trust distribution tax under section 271-15 , 271-20 , 271-25 or 271-30 .
Director not taking part in distribution decision
271-40(2)
If:
(a) the director did not take part in any decision to confer the entitlement or make the distribution concerned; and
(b) if the director was aware of the proposal to make the decision or of the fact that it was made - the director took reasonable steps to prevent the making, or the implementation, of the decision;
the director is not included among the persons jointly and severally liable.
Director taking part in distribution decision
271-40(3)
If:
(a) the director took part in any decision to confer the entitlement or make the distribution; and
(b) the director voted against, or otherwise disagreed with the decision; and
(c) the director took reasonable steps to prevent the implementation of the decision;
the director is not included among the persons jointly and severally liable.
Notice about non-resident distributions
271-45(1)
The Commissioner may give a notice in accordance with section 271-55 (which deals with information about distributions etc. by certain non-residents) to the trustee of a trust (the primary entity ) who has made a family trust election, provided the requirements of subsections (2) to (4) of this section are met.
First requirement
271-45(2)
At a time (the test time ) while the election is in force (including a time before it was made), the primary entity must have conferred a present entitlement to, or distributed, income or capital upon or to a company, partnership or trust (the secondary entity ) that at the time was, because of an interposed entity election, a member of the family group of the individual (the primary individual ) specified in the family trust election.
Second requirement
271-45(3)
When the Commissioner gives the notice:
(a) if the secondary entity is a partnership - a partner must be a non-resident; and
(b) if the secondary entity is a company - the company must be a non-resident; and
(c) if the secondary entity is a trust - either:
(i) a trustee must be a non-resident; or
(ii) the central management and control of the trust must be outside Australia.
Third requirement
271-45(4)
The Commissioner must give the notice before the later of:
(a) 5 years after the conferral or distribution mentioned in subsection (2); and
(b) the end of the period during which the primary entity is required by section 262A to retain records in relation to the income year in which the conferral or distribution took place.
Notice about non-resident distributions
271-50(1)
If:
(a) a company, the trustee of a trust or the partners in a partnership (which company, trust or partnership is the primary entity ) makes an interposed entity election to be included in the family group of an individual specified in a family trust election; and
(b) the requirements of subsections (2) to (4) are met;
the Commissioner may give the company, trustee or partners a notice in accordance with section 271-55 (which deals with information about distributions etc. by certain non-residents).
First requirement
271-50(2)
At a time (the test time ) while the election was in force (including a time before it was made), the primary entity must have conferred a present entitlement to, or distributed, income or capital upon or to a company, partnership or trust (a secondary entity ), where the secondary entity:
(a) was the family trust whose trustee made the family trust election; or
(b) was, because of an interposed entity election that was in force at the time, included in the family group of the individual (the primary individual ) specified in the family trust election.
Second requirement
271-50(3)
When the Commissioner gives the notice:
(a) if the secondary entity is a partnership - a partner must be a non-resident; and
(b) if the secondary entity is a company - the company must be a non-resident; and
(c) if the secondary entity is a trust - either:
(i) a trustee must be a non-resident; or
(ii) the central management and control of the trust must be outside Australia.
Third requirement
271-50(4)
The Commissioner must give the notice before the later of:
(a) 5 years after the conferral or distribution mentioned in subsection (2); and
(b) the end of the period during which the primary entity is required by section 262A to retain records in relation to the income year in which the conferral or distribution took place.
Information required
271-55(1)
The notice that the Commissioner may give the company, partnership or trustee if the requirements of subsections 271-45(2) to (4) or 271-50(2) to (4) are met must require the company, partners or trustee to give the Commissioner specified information about conferrals of present entitlements to, or distributions of, income or capital since the test time by any company, partnership or trust covered by subsection (2) of this section.
Entities covered
271-55(2)
The following are covered by this subsection:
(a) the secondary entity; and
(b) any company in respect of which an interposed entity election had been made to be included in the family group of the primary individual, where the company was a non-resident, and the election was in force, when the conferral or distribution took place; and
(c) any partnership in respect of which an interposed entity election had been made to be included in the family group of the primary individual, where any of the partners was a non-resident, and the election was in force, when the conferral or distribution took place; and
(d) any trust in respect of which a family trust election specifying the primary individual had been made or in respect of which an interposed entity election had been made to be included in the family group of the primary individual, where, when the conferral or distribution took place, either a trustee was a non-resident or the trust ' s central management and control were outside Australia.
Information not within knowledge
271-55(3)
The information need not be within the knowledge of the company, partners or trustee at the time the notice is given.
Period for giving information
271-55(4)
The notice must specify a period within which the company, partnersor trustee is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice.
Company ' s liability
271-55(5)
If the company does not give the information within the period or within such further period as the Commissioner allows, it, together with each person who was a director of the company at the test time, is jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital mentioned in subsection 271-50 (2).
Partners ' liability
271-55(6)
If the partners do not give the information within the period or within such further period as the Commissioner allows, they, together with each person who at the test time was a director of any partner that was a company, are jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital mentioned in subsection 271-50 (2).
Trustee ' s liability
271-55(7)
If the trustee does not give the information within the period or within such further period as the Commissioner allows:
(a) if the trustee is an individual - the trustee is liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital mentioned in subsection 271-45 (2) or 271-50(2); or
(b) if the trustee is a company - the trustee, together with each person who was a director of the company at the test time, is jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital mentioned in subsection 271-45 (2) or 271-50(2).
Conditions for tax liability
271-60(1)
If:
(a) tax under section 271-15 on the amount or value of income or capital of a family trust becomes due and payable; and
(b) the Commissioner determines, in writing, at or after the time when the tax became due and payable, that it is unlikely that the whole or part (the unpaid amount ) of the tax will be paid; and
(c) when the Commissioner makes the determination:
(i) a trustee of the family trust is a non-resident; or
(ii) the central management and control of the family trust is outside Australia.
then the consequences set out in subsection (2) result.
Tax liability
271-60(2)
The consequences are:
(a) if there is only one person covered by subsection (3) - that person is liable to pay tax, as imposed by the Family Trust Distribution Tax (Secondary Liability) Act 1998 , on the unpaid amount; and
(b) if there are 2 or more persons covered by subsection (3) - those persons are jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Secondary Liability) Act 1998 , on the unpaid amount.
Persons liable under subsection (2)
271-60(3)
The persons covered by this subsection are:
(a) the trustee of any trust to which subsection (4) applies; and
(b) if the trustee of any such trust is a company - any person who is a director of the company when the determination is made; and
(c) any company to which subsection (5) applies; and
(d) any person who is a director of such a company when the determination is made.
Trust mentioned in paragraph (3)(a)
271-60(4)
This subsection applies to a trust if the trust would be:
(a) prevented by Division 266 or 267 from deducting a tax loss or amount in respect of a debt; or
(b) required by Division 266 or 267 to work out its net income and tax loss under Division 268 ;
in the income year in which the determination is made, or an earlier income year, if the family trust had not been a family trust.
Company mentioned in paragraph (3)(c)
271-60(5)
This subsection applies to a company if, in its return of income for the income year in which the determination is made or an earlier income year:
(a) the company deducted an amount in respect of a debt, where it was allowed to do so but, because of former section 63B or 63C , or Subdivision 165-C , 709-D or 719-I of the Income Tax Assessment Act 1997 , it would not have been if the family trust had not been a family trust; or
(b) the company deducted a tax loss (within the meaning of the Income Tax Assessment Act 1997 ) where it was allowed to do so but, because of Subdivision 165-A of that Act, it would not have been if the family trust had not been a family trust; or
(c) the company applied a net capital loss (within the meaning of former Part IIIA of this Act) where it was allowed to do so but, because of former subsection 160ZC(5), it would not have been if the family trust had not been a family trust; or
(d) the company applied a net capital loss (within the meaning of the Income Tax Assessment Act 1997 ) where it was allowed to do so but, because of Subdivision 165-CA of that Act, it would not have been if the family trust had not been a family trust;
(e) the company did not calculate its taxable income in accordance with former section 50C of this Act where it was not required to do so but would have been if the family trust had not been a family trust; or
(f) the company calculated its taxable income in accordance with former section 50C and took into account an amount, by reason of former subsection 50D(2), in ascertaining the eligible notional loss of the company under former section 50D, where it was required to calculate its taxable income in accordance with former section 50C and entitled to take the amount into account but would not have been so entitled if the family trust had not been a family trust; or
(g) the company did not calculate its taxable income and tax loss under Subdivision 165-B of the Income Tax Assessment Act 1997 where it was not required to do so but would have been if the family trust had not been a family trust; or
(h) the company did not calculate its net capital gain and net capital loss under Subdivision 165-CB of the Income Tax Assessment Act 1997 where it was not required to do so but would have been if the family trust had not been a family trust.
When section applies
271-65(1)
This section applies if:
(a) a company, the partners in a partnership or the trustee of a trust makes an interposed entity election to be included in the family group of an individual (the primary individual ); and
(b) while the interposed entity election is in force, the company, partnership or trust (the primary interposed entity ) confers a present entitlement to, or distributes, income or capital; and
(c) family trust distribution tax becomes due and payable on the amount or value of the income or capital.
Determination about unpaid tax
271-65(2)
If:
(a) the Commissioner determines, in writing, at or after the time when the tax became due and payable, that it is unlikely that the whole or part (the unpaid amount ) of the tax will be paid; and
(b) at the time:
(i) if the primary interposed entity is a company - the company is a non-resident; and
(ii) if the primary interposed entity is a partnership - a partner is a non-resident; and
(iii) if the primary interposed entity is a trust - either a trustee is a non-resident or the central management and control of the trust is outside Australia;
then the consequences in subsection (3) result.
Consequences
271-65(3)
The consequences are:
(a) if there is only one person covered by subsection (4) - that person is liable to pay tax, as imposed by the Family Trust Distribution Tax (Secondary Liability) Act 1998 , on the unpaid amount; and
(b) if there are 2 or more persons covered by subsection (4) - those persons are jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Secondary Liability) Act 1998 , on the unpaid amount.
Persons covered
271-65(4)
The persons covered by this subsection are:
(a) any company to which subsection (5) applies; and
(b) any person who is a director of such a company when the determination is made; and
(c) any partner in a partnership to which subsection (5) applies; and
(d) if any partner in any such partnership is a company - any person who is a director of the company when the determination is made; and
(e) the trustee of any trust to which subsection (5) applies; and
(f) if the trustee of any such trust is a company - any person who is a director of the company when the determination is made.
Entities making election and distribution etc.
271-65(5)
This subsection applies to any company, partnership or trust (an entity ), other than the primary interposed entity, meeting the following conditions:
(a) the company, the partners in the partnership or the trustee of the trust made:
(i) an interposed entity election to be included in the family group of the primary individual; or
(ii) a family trust election specifying the primary individual; and
(b) while that election and the interposed entity election made in respect of the primary interposed entity were in force, and before the Commissioner made the determination mentioned in paragraph (2)(a), the entity conferred a present entitlement to, or distributed, income or capital upon or to an eligible entity (see subsection (6)).
Eligible entities
271-65(6)
Each of the following is an eligible entity :
(a) the primary interposed entity;
(b) a company in respect of which an interposed entity election had been made to be included in the family group of the primary individual, where the company was a non-resident, and the election was in force, when the conferral or distribution took place;
(c) a partnership in respect of which an interposed entity election had been made to be included in the family group of the primary individual, where any of the partners was a non-resident, and the election was in force, when the conferral or distribution took place;
(d) a trust:
(i) in respect of which an interposed entity election had been made to be included in the family group of the primary individual; or
where, when the conferral or distribution took place, the election was in force and either a trustee was a non-resident or the trust ' s central management and control were outside Australia.
(ii) in respect of which a family trust election had been made specifying the primary individual;
If family trust distribution tax (the secondary tax ) becomes payable under section 271-60 or 271-65 on an amount of family trust distribution tax (the primary tax ) that the Commissioner determined was unlikely to be paid:
(a) if any of the primary tax is later paid - any liability to the secondary tax existing at the time of the payment is reduced by the amount of the payment; and
(b) if any of the secondary tax is later paid - any liability to the primary tax existing at the time of the payment is reduced by the amount of the payment.
Tax under sections 271-15 to 271-30
271-75(1)
Family trust distribution tax under any of sections 271-15 to 271-30 is due and payable:
(a) in a case where the conferral or distribution on whose amount or value the tax is payable was made before the day on which the election was made - at the end of 21 days after the day on which the election was made; or
(b) in any other case - at the end of 21 days after the day on which the conferral or distribution, on whose amount or value the tax is payable, was made;
or by the end of such later day as the Commissioner, in special circumstances, allows.
Tax under section 271-55
271-75(2)
Family trust distribution tax under section 271-55 is due and payable at the end of 21 days after the end of the period or further period mentioned in subsection (5), (6) or (7), as the case requires, of that section.
Tax under section 271-60 or 271-65
271-75(3)
Family trust distribution tax under section 271-60 or 271-65 is due and payable at the end of 21 days after the day, or the last day, on which the notice mentioned in subsection 271-90 (2) is given.
Debt due
271-75(4)
Family trust distribution tax, when it becomes due and payable, is a debt due to the Commonwealth and payable to the Commissioner.
Application
271-75(5)
Subsection (4) does not apply in relation to any family trust distribution tax that becomes due and payable on or after 1 July 2000.
Note:
For provisions about collection and recovery of family trust distribution tax and other amounts on or after 1 July 2000, see Part 4-15 in Schedule 1 to the Taxation Administration Act 1953 .
If any of the family trust distribution tax which a person is liable to pay remains unpaid 60 days after the day by which it is due to be paid, the person is liable to pay the general interest charge on the unpaid amount for each day in the period that:
(a) began at the beginning of the 60th day after the day by which the family trust distribution tax was due to be paid; and
(b) finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:
(i) the family trust distribution tax;
(ii) general interest charge on any of the family trust distribution tax.
Note:
The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953 .
Notice for purposes of section 271-15 etc.
271-90(1)
The Commissioner may give a person or persons, by post or otherwise, a notice specifying:
(a) the amount of any family trust distribution tax that the Commissioner has ascertained is payable under any of sections 271-15 to 271-30 and 271-55 by the person or persons; and
(b) the day on which that tax became or will become due and payable.
Notice for purposes of section 271-60 or 271-65
271-90(2)
The Commissioner must give persons, by post or otherwise, a notice specifying the amount of any family trust distribution tax that the Commissioner has ascertained is payable under section 271-60 or 271-65 by the persons.
Effect of notice on liability etc.
271-90(3)
The liability of a person or persons to family trust distribution tax on the amount or value of a distribution, and (except in the case of a notice under subsection (2)) the due date for payment of the tax, are not dependent on, or in any way affected by, the giving of a notice in respect of the amount.
Amendment of notice
271-90(4)
The Commissioner may at any time amend a notice. An amended notice is a notice for the purposes of this section.
Inconsistency between notices
271-90(5)
If there is an inconsistency between notices that relate to the same subject matter, the later notice prevails to the extent of the inconsistency.
Objections
271-90(6)
A person who is or persons who are dissatisfied with a notice made in relation to the person or persons may object against it in the manner set out in Part IVCof the Taxation Administration Act 1953 .
A person or persons may make a written request to the Commissioner to be given a notice under subsection 271-90 (1) or (2) in respect of specified circumstances in which family trust distribution tax may be payable.
Compliance with request for subsection 271-90 (1) notice
271-95(2)
In the case of a notice under subsection 271-90 (1), the Commissioner must, subject to subsection (4) of this section, comply with the request if it is lodged with the Commissioner before the end of the 21 days mentioned in subsection 271-75 (1) or (2), or before the end of such later day as the Commissioner allows.
Compliance with request for subsection 271-90(2) notice
271-95(3)
In the case of a notice under subsection 271-90 (2), the Commissioner must, subject to subsection (4) of this section, comply with the request regardless of when it is lodged.
Further information
271-95(4)
If the Commissioner considers that the notice cannot be given unless the person making the request gives the Commissioner further information about the circumstances in which the family trust distribution tax may be payable, the Commissioner must request the person to give the Commissioner the information.
Failure to give information
271-95(5)
If the person does not give the information, the Commissioner is not required to comply with the request to give the notice.
(Repealed by No 15 of 2017)
If:
(a) family trust distribution tax (the tax payable ) becomes payable under any of sections 271-15 to 271-30 and 271-55 on the amount or value of income or capital of a company, partnership or trust; and
(b) a payment (the tax payment amount ) of the whole or part of the tax payable is made, or a reduction (also the tax payment amount ) in the whole or part of the tax payable takes place under paragraph 271-70(b) ; and
(c) taking into account any previous application of this subsection, the whole or part of the amount or value of the income or capital is included in the assessable income of the company, partnership or trust or of any other person;
the amount included in the assessable income is reduced by the amount worked out using the formula in subsection (2).
271-105(2)
The formula is:
|
Tax payment amount
Tax payable |
× Original assessable amount |
The original assessable amount is so much of the amount or value of the income or capital as, disregarding any previous reductions under this section, is included in the assessable income of the company, partnership or trust or of any other person.
271-105(3)
The amount of the reduction is not assessable income and is not exempt income.
If, under a trust instrument, a beneficiary has a vested and indefeasible interest in a share of income of the trust that the trust derives from time to time, or of the capital of the trust, the beneficiary has a fixed entitlement to that share of the income or capital.
Case where interest not defeasible
272-5(2)
If:
(a) a person holds units in a unit trust; and
(b) the units are redeemable or further units are able to be issued; and
(c) if units in the unit trust are listed for quotation in the official list of an approved stock exchange - the units held by the person will be redeemed, or any further units will be issued, for the price at which other units of the same kind in the unit trust are offered for sale on the approved stock exchange at the time of the redemption or issue; and
(d) if the units are not listed as mentioned in paragraph (c) - the units held by the person will be redeemed, or any further units will be issued, for a price determined on the basis of the net asset value, according to Australian accounting principles, of the unit trust at the time of the redemption or issue;
then the mere fact that the units are redeemable, or that the further units are able to be issued, does not mean that the person ' s interest, as a unit holder, in the income or capital of the unit trust is defeasible.
Deemed fixed entitlement
272-5(3)
If:
(a) a beneficiary with an interest in a share of income that the trust derives from time to time, or of the capital of a trust, does not have a fixed entitlement to the share; and
(b) the Commissioner considers that the beneficiary should be treated as having the fixed entitlement, having regard to:
(i) the circumstances in which the entitlement is capable of not vesting or the defeasance can happen; and
(ii) the likelihood of the entitlement not vesting or the defeasance happening; and
(iii) the nature of the trust;
the beneficiary has the fixed entitlement.
If a shareholder in a company holds shares carrying the right to receive some or all of the dividends that may be paid by the company, the shareholder has a fixed entitlement to a share of the income of the company equal to the percentage of the total dividends represented by the dividends that the shareholder has a right to receive.
272-10(2)
If a shareholder in a company holds shares carrying the right to receive the whole or part of any distribution of the paid-up share capital of the company in the event of any return of capital to shareholders, the shareholder has a fixed entitlement to a share of the capital of the company equal to the percentage of the total distribution represented by the amount that the shareholder has a right to receive.
If, under a partnership agreement:
(a) a partner is entitled to a share of income that the partnership derives from time to time, or of the capital of the partnership; and
(b) the share is not able to be varied;
the partner has a fixed entitlement to that share of the income or capital.
Deemed fixed entitlement
272-15(2)
If:
(a) a partner does not have a fixed entitlement to a share of income that the partnership derives from time to time, or of the capital of a partnership, only because the partner ' s share of the income or capital is able to be varied; and
(b) the Commissioner considers that the partner should be treated as having the fixed entitlement, having regard to:
(i) the circumstances in which the share is able to be varied; and
(ii) the likelihood of the variation happening; and
(iii) the nature of the partnership;
the partner has the fixed entitlement.
A person holds a fixed entitlement to a share of the income or capital of a company, partnership or trust indirectly if the person holds the entitlement indirectly through fixed entitlements to shares of the income or capital, respectively, of interposed companies, partnerships or trusts.
Coverage of section
272-25(1)
This section affects references in this Schedule (other than in subparagraph 269-75(b)(ii) and section 272-30 ) to a person or individual having, directly or indirectly , a fixed entitlement to a share of the income or capital of a company, partnership or trust (the main entity ) at a particular time (the test time ).
Note:
This section will not affect a reference to a person or individual having a fixed entitlement where the phrase " directly or indirectly " is not used.
Certain interposed government bodies and special companies
272-25(2)
If at the test time a government body or a special company has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity, subsection (4) or (5) applies.
To find out the meaning of government body and special company : see section 272-140 .
Certain interposed funds
272-25(3)
If:
(a) a fund is:
(i) a complying superannuation fund or complying approved deposit fund in relation to the income year in which the test time occurs; or
(ii) a superannuation fund for foreign residents at the test time; and
(b) at the test time the fund has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity;
subsection (4) or (5) applies.
Note:
See subsection 6(1) for the meaning of complying superannuation fund, complying approved deposit fund and superannuation fund for foreign residents .
Government bodies, and funds or companies with more than 50 members
272-25(4)
In the case of a government body, or a fund or company that has more than 50 members:
(a) except where paragraph (b) applies - the body, fund or company is treated as if it had the fixed entitlement as an individual and for the individual ' s own benefit; and
(b) if the reference is in subsection 272-105 (2) - the fixed entitlement is treated as if it were held instead by more than 20 individuals and for their own benefit.
Funds or companies with 50 members or fewer
272-25(5)
In the case of a fund or company that has 50 members or fewer, the fund or company is treated as if it did not have the entitlement, but the members are treated as if they had the entitlement in equal proportions.
Mixed application of subsections (4) and (5) in certain provisions
272-25(6)
If, apart from this subsection:
(a) the following apply:
(i) for the purposes of section 266-40 or subsection 267-40(2) , 267-70(2) , 268-10(3) , 268-15(3) or 268-25(4) , it is necessary to determine whether individuals had fixed entitlements during a period; and
(ii) the consequences in subsection (4) would apply to a fund or company for part of the period and the consequences in subsection (5) would apply for the remainder of the period; or
(b) the following apply:
(i) for the purposes of subsection 266-90(1) or (2) , 266-125(2) , 266-165(2) or 268-20(3) , it is necessary to determine whether individuals had fixed entitlements at 2 times; and
(ii) the consequences in subsection (4) would apply to a fund or company at one of the times and the consequences in subsection (5) would apply at the other time;
the consequences in subsection (5) instead apply to the fund or company for the whole of the period, or at both of the times, as the case may be.
Entities ceasing to be special companies
272-25(7)
If:
(a) subsection (4) or (5) applies in relation to a special company during a period (the special company period ); and
(b) the special company period ends when the special company ceases to be a special company without ceasing to exist; and
(c) having regard to the matters set out in subsection (8), the Commissioner considers it fair and reasonable to treat one or more of the persons who were members of the special company immediately after it ceased to be a special company as having held the fixed entitlement mentioned in subsection (2) during the whole or part of the special company period;
then:
(d) subsection (4) or (5) does not apply in relation to the special company during the whole or the part of the special company period; and
(e) the one or more persons are, as mentioned in paragraph (c), treated as having the fixed entitlement instead of the company.
Matters for the purposes of paragraph (7)(c)
272-25(8)
For the purposes of paragraph (7)(c), the matters are:
(a) the identity of its members before and after the special company ceases to be a special company; and
(b) the circumstances in which it ceases to be a special company; and
(c) the nature of the rights in the special company held by its members before and after it ceases to be a special company; and
(d) any other matter that the Commissioner considers relevant.
Coverage of section
272-30(1)
This section also affects references in this Schedule (other than in subparagraph 269-75(b)(ii) and section 272-25 ) to a person or individual having, directly or indirectly , a fixed entitlement to a share of the income or capital of a company, partnership or trust (the main entity ) at a particular time (the test time ).
Note:
This section will not affect a reference to a person or individual having a fixed entitlement where the phrase " directly or indirectly " is not used.
Interposed family trusts
272-30(2)
If at the test time a family trust has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity, it is treated as if it had the fixed entitlement as an individual and for the individual ' s own benefit.
Interposed listed public companies and widely held unit trusts
272-30(3)
If:
(a) at the test time a listed public company or widely held unit trust has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity; and
To find out the meaning of listed public company : see section 272-135 .
(b) having regard to the matters set out in subsection (4), the Commissioner considers it fair and reasonable to treat the company or trust as holding, at the test time, the whole or part of its fixed entitlement as an individual and for the individual ' s own benefit;
the company or trust is treated as so holding the whole or the part of its fixed entitlement.
Matters for the purposes of paragraph (3)(b)
272-30(4)
For the purposes of paragraph (3)(b), the matters are:
(a) the practicability of identifying any individuals who at the test time have fixed entitlements to a share of the income or capital of the main entity indirectly through the company or trust and for their own benefit; and
(b) any change before or after the test time in the individuals who can be identified as having fixed entitlements of the kind mentioned in paragraph (a); and
(c) any other matter that the Commissioner considers relevant.
If the operation of a provision of this Schedule depends on or is in any way affected by an individual having a fixed entitlement directly or indirectly, and for the individual ' s own benefit, to a share of the income or capital of a company, partnership or trust, an individual who would otherwise have that fixed entitlement is taken not to have it for the purposes of the operation of the provision if the condition in subsection (2) is met.
272-35(2)
The condition is that an arrangement was entered into where:
(a) the arrangement in some way (directly or indirectly) related to, affected or depended for its operation on the fixed entitlement or its value; and
(b) the purpose, or one of the purposes, of the arrangement was to ensure that, for the purposes of the operation of the provision, the individual would have the fixed entitlement.
If, immediately before an individual dies, he or she has a fixed entitlement to a share of the income or capital of a trust, partnership or company directly or indirectly, and for his or her own benefit, the individual is taken to continue to have the entitlement for so long as:
(a) it is held by someone as trustee of the individual ' s estate; or
(b) it is held by someone who received it as a beneficiary of the estate.
A trust distributes income or capital of the trust to a person if it:
(a) pays or credits the income or capital in the form of money to the person; or
(b) transfers the income or capital in the form of property to the person; or
(c) reinvests or otherwise deals with the income or capital on behalf of the person or in accordance with the directions of the person; or
(d) applies the income or capital for the benefit of the person;
in the person ' s capacity as a beneficiary of the trust.
Distribution of income
272-50(1)
A company distributes income of the company to a person if the company pays a dividend or non-share dividend to the person.
Distribution of capital
272-50(2)
A company distributes capital of the company to a person if:
(a) it pays or credits money, or transfers property, of the company to the person, where the amount paid or credited, or the amount or value of the property, is debited against an amount standing to the credit of the share capital account of the company; and
(b) the payment, crediting or transfer is not the payment of a dividend.
272-50(3)
A company distributes capital of the company to a person if the company makes a non-share capital return to the person.
A partnership distributes income or capital of the partnership to a person if it:
(a) pays or credits the income or capital in the form of money to the person; or
(b) transfers the income or capital in the form of property to the person; or
(c) reinvests or otherwise deals with the income or capital on behalf of the person or in accordance with the directions of the person; or
(d) applies the income or capital for the benefit of the person;
in the person ' s capacity as a partner in the partnership.
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:
(a) pays (including by way of a loan) or credits money of the entity to the person, or reinvests such money for the person; or
(b) transfers property of the entity to, or allows use of property of the entity by, the person; or
(c) deals with money or property of the entity for or on behalf of the person or as the person directs; or
(d) applies money or property of the entity for the benefit of the person; or
(e) extinguishes, forgives, releases or waives a debt or other liability owed by the person to the entity.
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.
Character of distributions
272-60(3)
Each thing that is a distribution because of subsection (1) is a distribution of income unless it is clear that the money or property concerned was capital, or that the debt or liability was attributable to capital, of the entity.
A trust distributes income or capital indirectly to an individual if it distributes the income or capital to a company, partnership or trust (the first interposed entity ) interposed between the trust and the individual and:
(a) the first interposed entity distributes to the individual an amount or property attributable to the income or capital; or
(b) another company, partnership or trust (the final interposed entity ) distributes to the individual an amount or property that is attributable to the income or capital as a result of:
(i) the distribution of an amount or property attributable to the income or capital to the final interposed entity by the first interposed entity; or
(ii) successive distributions of amounts or property attributable to the income or capital to and by any companies, partnerships or trusts interposed between the first interposed entity and the final interposed entity.
A trust is a fixed trust if persons have fixed entitlements to all of the income and capital of the trust.
A trust is a non-fixed trust if it is not a fixed trust.
A trust is a family trust at any time when a family trust election (see subsection 272-80 (1)) in respect of the trust is in force.
Nature of election
272-80(1)
Subject to this section, the trustee of the trust may make an election (the family trust election ) in accordance with this section that the trust is a family trust for the purposes of this Schedule at all times after the beginning of a specified income year.
How election made
272-80(2)
The election must be in writing and in the approved form.
Election to specify individual and certain information
272-80(3)
The election must also specify an individual as the individual whose family group is to be taken into account in relation to the election, and must contain such other information as the Commissioner requires.
Trust must pass family control test
272-80(4)
If the trust does not pass the family control test (see section 272-87 ) at the end of the specified income year, the trustee must not make the election.
Earlier year may be the specified year
272-80(4A)
The specified income year may be a year before the one in which the election is made if:
(a) at all times in the period from the beginning of the specified income year until 30 June in the income year before the one during which the election is made, the trust passes the family control test (see section 272-87 ); and
(b) either:
(i) any conferrals of present entitlement to income or capital of the trust made by the trustee during that period have been made on; or
the individual specified in the election or members of that individual ' s family group.
(ii) any distributions of income or capital of the trust made by the trustee during that period have been made to;
Election generally cannot be varied or revoked
272-80(5)
Subject to subsections (5A), (5B), (5C), (6) and (6A), the election cannot be varied or revoked.
Variation cases
272-80(5A)
The trustee of a trust may, in respect of an income year during the period specified in subsection (6B), vary an election so that a different individual (the new individual ) is specified for the purposes of subsection (3) as the individual whose family group is to be taken into account in relation to the election if:
(a) the new individual was a member of the family of the individual originally specified in the election at the election commencement time; and
(b) any conferrals of present entitlement to income or capital of:
(i) the trust; and
during the period in which the election has been in force have been made on the new individual or on persons who would have been members of the new individual ' s family group at the time of the conferral; and
(ii) an entity for which an interposed entity election has been made in relation to the trust;
(c) any distributions of income or capital of:
(i) the trust; and
during the period in which the election has been in force have been made to the new individual or to persons who would have been members of the new individual ' s family group at the time of the distribution.
(ii) an entity for which an interposed entity election has been made in relation to the trust;
272-80(5B)
A variation of an election under subsection (5A) in relation to a trust can only be made once.
272-80(5C)
The trustee of a trust may vary an election so that a different individual (the new individual ) is specified for the purposes of subsection (3) as the individual whose family group is to be taken into account in relation to the election if:
(a) an order; or
(b) an agreement; or
(c) an award;
of a kind mentioned in paragraphs 126-5(1)(a) to (f) of the Income Tax Assessment Act 1997 results in the new individual, or a group comprising the new individual and members of the new individual ' s family, having control of the trust under subsection (5D).
272-80(5D)
The new individual, or a group comprising the new individual and members of the new individual ' s family, have control of the trust for the purposes of subsection (5C) if any of paragraphs 272-87(2)(a) to (g) are satisfied in relation to a group consisting of:
(a) the new individual; or
(b) the new individual and members of the new individual ' s family.
Revocation cases
272-80(6)
The trustee of a fixed trust may revoke the election if:
(a) at the beginning of the specified income year:
(i) the individual specified in the election; or
(ii) one or more members of the individual ' s family; or
or any combination of the above, had the fixed entitlements, directly or indirectly, and for their own benefit, to all of the income and capital of the trust; and
(iii) the trustee of another trust that is a family trust, provided the individual is specified in that trust ' s family trust election;
(b) at a later time (whether before or after the return is furnished, but while the trust is still a fixed trust), an individual, other than one of a kind mentioned in subparagraph (a)(i), (ii) or (iii), holds a fixed entitlement, directly or indirectly, and for his or her own benefit, to any of the income or capital of the trust.
272-80(6A)
The trustee of a trust may, in respect of an income year during the period specified in subsection (6B), revoke the election unless:
(a) the trust, or another entity, has incurred a tax loss and had its assessable income reduced by part or all of the loss in an income year or years during the period:
(i) beginning at the beginning of the income year specified in the election; and
and the trust, or the other entity, could not have had its assessable income so reduced had the election not been in force; or
(ii) finishing at the end of the income year immediately prior to the income year from which the revocation is to be effective (see subsection (8));
(b) the trust, or another entity, has claimed a deduction for bad debts in an income year or years during the period specified in paragraph (a) and the trust, or the other entity, could not have claimed the deduction had the election not been in force; or
(c) a beneficiary of the trust in an income year during the period specified in paragraph (a) received a franked distribution indirectly through the trust and paragraph 207-150(1)(a) of the Income Tax Assessment Act 1997 would have applied in relation to the distribution had the election not been in force.
Period to vary or revoke the election
272-80(6B)
The trustee of a trust cannot vary or revoke the election under subsections (5A) or (6A) unless the variation or revocation is in respect of an income year that occurs during the period:
(a) beginning at the beginning of the income year specified in the election and finishing at the end of the fourth income year after the income year specified in the election; or
(b) beginning at the beginning of the income year in which Schedule 8 to the Tax Laws Amendment (2007 Measures No 4) Act 2007 commenced and finishing at the end of the subsequent income year.
How to vary or revoke the election
272-80(7)
To revoke an election under subsection (6), the revocation must be made in the trust ' s return of income for the income year in which the later time occurs. If the trustee is not required to give a return for the income year, the revocation must:
(a) be in writing and in the approved form; and
(b) specify the later time; and
(c) be given to the Commissioner before the end of:
(i) 2 months after the end of the income year in which the later time occurs; or
(ii) such later day as the Commissioner allows.
272-80(8)
To vary or revoke an election under subsection (5A), (5C) or (6A), the variation or revocation must be made in the trust ' s return of income for the income year from which the variation or revocation is to be effective. If the trustee is not required to give a return for the income year, the variation or revocation must:
(a) be in writing and in the approved form; and
(b) specify the income year from which the variation or revocation is to be effective; and
(c) be given to the Commissioner on or before:
(i) 2 months after the end of that income year; or
(ii) such later day as the Commissioner allows.
When election is in force
272-80(9)
The election is in force:
(a) if it is not revoked - at all times after the election commencement time (see subsection (10)); or
(b) if it is revoked under subsection (6) - at all times from the election commencement time until the later time specified in the revocation; or
(c) if it is revoked under subsection (6A) - at all times from the election commencement time until the end of the income year immediately prior to the income year from which the revocation is to be effective (see subsection (8)).
Election commencement time
272-80(10)
The election commencement time is:
(a) if the trust does not pass the family control test (see section 272-87 ) at all times in the income year specified - the earliest time from which the trust does pass the family control test for the remainder of that income year; or
(b) in any other case - the beginning of the income year specified.
Only one election
272-80(11)
The trustee must not make more than one election under this section in relation to the trust.
Nature of election
272-85(1)
Subject to this section, if the trustee makes a family trust election, a company, the partners in any partnership or the trustee of any other trust may make an election (an interposed entity election ) in accordance with this section that the company, partnership or trust is to be included, at all times after a specified day in a specified income year, in the family group of the individual specified in the family trust election.
How election made
272-85(2)
The election must be in writing and in the approved form.
Election to contain information
272-85(3)
The election must contain such information as the Commissioner requires.
Family control test must be passed
272-85(4)
The company, partnership or trust must pass the family control test (see section 272-87 ) at the end of the income year.
Earlier year may be the specified year
272-85(4A)
The specified income year may be a year before the one in which the election is made if:
(a) at all times in the period from the beginning of the specified income year until 30 June in the income year before the one during which the election is made, the company, partnership or trust passes the family control test (see section 272-87 ); and
(b) either:
(i) any conferrals of present entitlement to income or capital of the trust made by the trustee during that period have been made on; or
the individual specified in the family trust election or members of that individual ' s family group.
(ii) any distributions of income or capital of the trust made by the trustee during that period have been made to;
Election generally cannot be revoked
272-85(5)
Subject to subsections (5A) and (5B), the election cannot be revoked.
Revocation cases
272-85(5A)
A company, the partners in any partnership or the trustee of a trust may, in respect of an income year during the period specified in subsection (5C), revoke the election if at the election commencement time, or at a later time, the entity was, or becomes, a member of the family group (within the meaning of subsection 272-90(3A) or (5) ) of the individual specified in the family trust election.
272-85(5B)
