ATO Interpretative Decision

ATO ID 2003/476 (Withdrawn)

Income Tax

Part IX taxation of superannuation entities - distributions from a related unit trust
FOI status: may be released
Status of this decision: Decision Withdrawn 8 September 2006
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.

This ATOID provides you with the following level of protection:

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Issue

Are the distributions made from a related unit trust to a self managed superannuation fund (SMSF) special income under section 273 of the Income Tax Assessment Act 1936 (ITAA 1936) where the parties are dealing with each other at arm's length?

Decision

No. The distributions received from a related unit trust by a SMSF where they are dealing with each other at arm's length are not special income under section 273 of the ITAA 1936.

Facts

The units in the unit trust are owned by the SMSF and the member who is also a trustee of the SMSF.

The SMSF owns 85% of the units in the unit trust.

The unit trust owns a residential property.

The member is the tenant of the residential property owned by the unit trust.

The property is leased at an arm's length rate and the parties have entered into a rental lease on similar terms to arm's length commercial leases.

Reasons for Decision

Section 273 of the ITAA 1936 applies to certain income derived in a year of income by a fund or unit trust. The types of income outlined in section 273 of the ITAA 1936 will be deemed special income.

Subsection 273(7) of the ITAA 1936 states that income derived by virtue of holding fixed entitlement to the income is special income if the entity acquired the fixed entitlement, or the income was derived under an arrangement in which some or all of the parties were not dealing with each other at arm's length in relation to the arrangement, and the amount of that income is greater than might have been expected to have been derived by the entity if those parties had been dealing with each other at arm's length in relation to the arrangement.

The transaction is between the unit trust and the member of the SMSF. The transaction will be conducted and maintained on an arm's length basis. As there is no arrangement and the transaction is on an arm's length basis, the income distributed from the unit trust to the SMSF will not be deemed special income.

Date of decision:  18 June 2003

Year of income:  Year ending 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   section 273

Keywords
Special income of superannuation funds
Unit trusts

Business Line:  Superannuation

Date of publication:  20 June 2003

ISSN: 1445-2782

history
  Date: Version:
  18 June 2003 Original statement
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