ATO Interpretative Decision

ATO ID 2003/802

Income Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Will the taxpayer, an individual unit holder receiving a discount capital gain distributed by a corporate unit trust, adjust the amount of the capital gain received in terms of section 115-215 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. The taxpayer will not adjust the amount of the capital gain received in terms of section 115-215 of the ITAA 1997.

Facts

The unit trust is a corporate unit trust under section 102J of the Income Tax Assessment Act 1936 (ITAA 1936). The trust made a capital gain from the sale of shares that it acquired after 21 September 1999. The trust had owned the shares for more than 12 months at the time that it disposed of them.

The trust has not made a choice under section 703-50 of the ITAA 1997 to form a consolidated group. The trust was entitled to the 50% CGT discount for the discount capital gain in terms of subparagraph 115-100(b)(ii) of the ITAA 1997. The trustee distributed the capital gain to the unit holders in proportion to their unit holdings.

Reasons for Decision

Subdivision 115-C of the ITAA 1997 sets out the rules for dealing with the net income of the trust that has a capital gain. The rules treat that part of the net income attributable to the trust's net capital gain as a capital gain made by a beneficiary who is presently entitled to a share of the trust net income.

Subsection 115-210(1) of the ITAA 1997 states that this Subdivision applies where a net capital gain is taken into account in calculating the trust's net income for the year. This subsection adopts the definition of 'net income' contained at subsection 95(1) of the ITAA 1936.

Under subsection 115-215(2) of the ITAA 1997 the rules in Subdivision 115-C apply to a beneficiary only where the beneficiary's assessable income for the income year includes an amount under:

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paragraph 97(1)(a) of the ITAA 1936

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subsection 98A(1) of the ITAA 1936 because the beneficiary is a beneficiary described in subsection 98(4) of that Act; or

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subsection 100(1) of the ITAA 1936.

The net income of a corporate unit trust is determined in accordance with the definition in subsection 102D(1) of the ITAA 1936. The distribution to a beneficiary of a corporate unit trust is a 'unit trust dividend' as defined in subsection 102D(1) of the ITAA 1936. A 'unit trust dividend' is included in beneficiary's assessable income in terms of subsection 44(1) of the ITAA 1936 (subsection 102L(13) of the ITAA 1936).

As the corporate unit trust's 'net income' does not fall under that definition at subsection 95(1) of the ITAA 1936 and the unit holder does not include the distribution in their assessable income under paragraph 97(1)(a) of the ITAA 1936, subsection 98A(1) of the ITAA 1936 or subsection 100(1) of the ITAA 1936, the taxpayer cannot adjust the amount of the capital gain received in terms of section 115-215 of the ITAA 1997.

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1936
   subsection 44(1)
   subsection 95(1)
   paragraph 97(1)(a)
   subsection 98A(1)
   subsection 98(4)
   subsection 100(1)
   subsection 102D(1)
   section 102J
   subsection 102L(13)

Related ATO Interpretative Decisions
ATO ID 2003/652

Keywords
Capital gains tax
CGT 50% individual discount
CGT discount
CGT trust distribution
Corporate unit trusts
Consolidated group
Consolidation
Net capital gain
Net income of a trust
Net capital gain
Unit trust distributions
Unitholders

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  5 September 2003

ISSN: 1445-2782