ATO Interpretative Decision

ATO ID 2002/603

Income Tax

The 45 day holding period rule - discretionary trust beneficiaries
FOI status: may be released

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Status of this decision: Decision Current

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Does section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) apply to imputation credits attached to Australian franked dividends being distributed to beneficiaries of a discretionary trust?

Decision

Yes, section 160APHO of the ITAA 1936 does apply to imputation credits attached to Australian franked dividends and as such, cannot be distributed to beneficiaries of a discretionary trust.

Facts

The trust is a discretionary trust where the beneficiaries have no fixed interest in the income or corpus of the trust. The trustee has not made a family trust election. The shares were purchased after 1 July 1997. The beneficiaries have each received more than $5000 in imputation credits. The trustee is a qualified person in relation to the dividend.

For the purposes of paragraph 160APHO(1)(a) of the ITAA 1936, neither the taxpayer nor an associate of the taxpayer has made, is under obligation to make, or is likely to make, a related payment in respect of a dividend as defined in section 160APHN of the ITAA.

Reasons for Decision

To be entitled to a franking credit, franking rebate, or intercorporate dividend rebate in relation to a particular dividend for the purposes of Division 1A of Part IIIAA of the ITAA 1936, a taxpayer must be a qualified person as defined in section 160APHD of the ITAA 1936. To be a qualified person, the beneficiaries must satisfy the requirements of subsection 160APHO(1) and paragraph 160APHO(2)(b) of the ITAA 1936.

The beneficiaries do not satisfy the requirements because they will not have held the shares for the required period, being at least 45 days for ordinary shares or 90 days for preference shares, as required by paragraph 160APHO(2)(b) of the ITAA 1936.

Date of decision: 12 March 2002.

Legislative References:
Income Tax Assessment Act 1936
   section 160APHD
   section 160APHN
   subsection 160 APHO(1)
   paragraph 160 APHO(1)(a)
   paragraph 160APHO(2)(b)

Keywords
Discretionary trusts
Imputation credits
Refund of imputation credits

Business Line: Private Groups and High Wealth Individuals

Date of publication: 31 May 2002

ISSN: 1445-2782

history

	Date:	Version:
You are here →	12 March 2002	Original statement
	17 June 2016	Updated statement
	19 December 2018	Archived

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