ATO Interpretative Decision

ATO ID 2003/842

Income Tax

Refund of tax on foreign sourced income to non-resident beneficiary
FOI status: may be released

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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is the non-resident beneficiary of a resident trust entitled to a refund under subsection 99D(1) of the Income Tax Assessment Act 1936 (ITAA 1936) of the tax paid by the trustee of a resident trust estate on foreign source income which was included in the calculation of the net income of the resident trust estate?

Decision

Yes. The non-resident beneficiary of a resident trust estate is entitled to a refund under subsection 99D(1) of the ITAA 1936 of the tax paid by the trustee of a resident trust estate on foreign source income which was included in the calculation of the net income of the resident trust estate.

Facts

The taxpayer is a non-resident beneficiary of a resident trust estate.

The resident trust estate's net income for the year included income and other gains on disposal of assets attributable to sources out of Australia.

The trustee of the trust estate pays the tax liability assessed based on the net income of the trust under subsection 99(2) of the ITAA 1936.

The trustee of the trust estate distributes the income of trust to the taxpayer.

The taxpayer requests in writing for a refund of the tax paid by the trustee in respect of the net income attributable to sources out of Australia.

The distributed income is not part of any 'reimbursement agreement' arrangements that are subject to section 100A of the ITAA 1936.

Reasons for Decision

Section 99D of the ITAA 1936 allows a non-resident beneficiary in a resident trust estate to obtain a refund of any Australian tax paid by the trustee of a resident trust estate if certain conditions are satisfied. Paragraphs 99D(1)(a) to 99D(1)(c) of the ITAA 1936 provide that an application may be made by the beneficiary of the resident trust estate for a refund of tax under the following circumstances:

•: the resident trust estate has been assessed pursuant to subsections 99(2), 99(3), 99A(4) or 99A(4A) of the ITAA 1936 in respect of the net income or a part of the net income of the trust estate of a year of income
•: the tax assessed has been paid, and
•: the trustee has paid an amount (distributed amount) of income of the trust estate of the relevant year of income to the beneficiary.

Paragraph 99D(1)(e) of the ITAA 1936 provides that the beneficiary is also required to satisfy the Commissioner of Taxation that the whole or a part of the distributed amount:

•: is attributable to a period when the beneficiary was non-resident and is also attributable to sources out of Australia
•: was taken into account in calculating the net income of the trust estate, and
•: is not part of any 'reimbursement agreement' arrangements that are subject to section 100A of the ITAA 1936.

As the taxpayer satisfies all the requirements of subsection 99D(1) of the ITAA 1936, the taxpayer is entitled to a refund of tax paid by the trustee of the resident trust estate on foreign source income which was included in the calculation of the net income of the resident trust estate.

Date of decision: 11 August 2003

Year of income: Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1936
   subsection 99(2)
   subsection 99(3)
   subsection 99A(4)
   subsection 99A(4A)
   section 99D
   paragraph 99D(1)(e)
   section 100A

Keywords
Foreign income
Distributions to non residents
Non resident beneficiaries

Siebel/TDMS Reference Number: 3181883

Business Line: Public Groups and International

Date of publication: 19 September 2003

ISSN: 1445-2782

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