ATO Interpretative Decision

ATO ID 2002/1100 (Withdrawn)

Income Tax

• This ATO ID is withdrawn from the database due to legislative changes to Part IIIAA of the Income Tax Assessment Act 1936 which took effect from 14 September 2006. Despite its withdrawal, this ATO ID continues to be a precedential view in respect of decisions up until that time.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the taxpayer, a trustee of a trust, entitled to a refund of an excess franking tax offset under section 67-30 of the Income Tax Assessment Act 1997 (ITAA 1997) where they are assessed under section 98 of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

No. The taxpayer, a trustee of a trust, is not entitled to a refund of an excess franking tax offset under section 67-30 of the ITAA 1997 where they are assessed under section 98 of the ITAA 1936.

Facts

The taxpayer is the trustee of a trust.

The taxpayer owns shares in a company.

Fully franked dividends were paid to the taxpayer on or after 1 July 2000.

The taxpayer made a trust distribution, including franked dividends, to a person under a legal disability. The taxpayer was assessed on this distribution under section 98 of the ITAA 1936 for an income year ending on or after 22 May 2001.

The taxpayer was entitled to a franking tax offset with regard to those dividends.

The total of the franking tax offset exceeded the amount of tax payable by the taxpayer if they had not received that tax offset.

Reasons for Decision

Section 160AQY of the ITAA 1936 provides that where a trustee is liable to be assessed under section 98 of the ITAA 1936 (other that subsection 98(3) of the ITAA 1936), or under sections 99 or 99A of the ITAA 1936, on a trust amount and an imputation credit is included in a trustee's assessable income, the taxpayer is entitled to a franking tax offset of that amount.

Generally the sum of any tax offsets available to a taxpayer is limited to the amount of tax payable (section 160AD of the ITAA 1936).

However, with effect from 1 July 2000, certain franking tax offsets are subject to the refundable tax offset rules under Division 67 of the ITAA 1997.

Paragraph 67-25(1)(c) of the ITAA 1997 provides that where a tax offset is available under section 160AQY of the ITAA 1936, that tax offset is subject to the refundable tax offset rules.

However, with regard to assessments for an income year ending on or after 22 May 2001, subsection 67-25(1B) of the ITAA 1997 applies. That subsection provides that the tax offset referred to in paragraph 67-25(1)(c) of the ITAA 1997 is only subject to the refundable tax offset rules if the trustee entitled to the tax offset is liable to be assessed under section 99 of the ITAA 1936.

The franked dividend received by the taxpayer was paid on or after 1 July 2000. The taxpayer is entitled to a franking tax offset for the amount of the imputation credit that is included in their assessable income. However, the taxpayer was assessed on the distribution made to the minor beneficiary under section 98 of the ITAA 1936. As the taxpayer was not assessed on the distribution under section 99 of the ITAA 1936 the requirement under subsection 67-25(1B) of the ITAA 1997 is not met.

Therefore, the taxpayer is not entitled to a refund of the excess franking tax offset under section 67-30 of the ITAA 1997.

Year of income:  Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   Division 67
   section 67-25
   paragraph 67-25(1)(c)
   subsection 67-25(1B)
   section 67-30

Keywords
Rebates
Refund of imputation credits
Imputation Credits
Franking rebates

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  30 November 2002

ISSN: 1445-2782