ATO Interpretative Decision

ATO ID 2004/164 (Withdrawn)

Income Tax

• This ATO ID is withdrawn due to subsection 272-90(7) of the ITAA 1997 being amended by Act No. 101 of 2006 to remove inoperative provisions. Further it is a simple restatement of the law and does not contain an interpretative decision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is a distribution of income or capital made by the trustee of a family trust to a charitable trust, all of whose income is exempt under section 50-5 of the Income Tax Assessment Act 1997 (ITAA 1997), subject to Family Trust Distribution Tax (FTDT) pursuant to section 271-15 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

No. A distribution of capital or income made by a family trust to a trustee of a charitable trust, all of whose income is exempt under section 50-5 of the ITAA 1997, is not subject to FTDT where it is considered to be a member of the specified individual's family group as defined by subsection 272-90(7) of Schedule 2F to the ITAA 1936.

Facts

The trustee of a trust has made a family trust election which is in force.

The family trust has made a distribution of income as defined by section 272-45 of Schedule 2F to the ITAA 1936 to a charitable trust.

The charitable trust, all of whose income is exempt under section 50-5 of the ITAA 1997, is a member of the primary individual's family group because, in respect of the conferral or distribution, section 78A of the ITAA 1936 would not prevent any of the deduction being allowable if a deduction were allowable under section 78 of the ITAA 1936 or Division 30 of the ITAA 1997.

The charitable trust has not made an interposed entity election.

Reasons for Decision

Section 271-15 of Schedule 2F to the ITAA 1936 imposes a liability for FTDT where the trustee of a trust has made a family trust election (section 272-80 of Schedule 2F to the ITAA 1936) and, during the time when the election is in force, the trust confers a present entitlement or distributes income or capital outside the family group of the individual specified in the family trust election.

The primary individual's family group is defined by section 272-90 of Schedule 2F to the ITAA 1936. Subsection 272-90(7) of Schedule 2F to the ITAA 1936 states:

an institution, hospital, trustee, society, association, club, or fund, all of whose income is exempt under:

(a)

paragraph 23(e), (ea), (ec), (g) or (j); or

(b)

section 50-5, 50-10 or 50-20, item 6.1 or 6.2 of the table in section 50-30, or item 9.1 or 9.2 of the table in section 50-45, of the ITAA 1997;

is a member of the primary individual's family group in relation to the conferral or distribution if, assuming that a deduction were allowable under section 78, or Division 30 of the ITAA 1997, in respect of the conferral or distribution, section 78A would not prevent any of the deduction being allowable.

As the charitable trust's income is exempt under section 50-5 of the ITAA 1997 and satisfies the other relevant conditions in subsection 272-90(7) of Schedule 2F to the ITAA 1936, it is considered to be a member of the specified individual's family group pursuant to paragraph 272-90(7)(b). Accordingly, FTDT is not payable on a distribution of income by the trustee of a family trust to the charitable trust.

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1936
   section 78
   section 78A
   Schedule 2F
   section 271-15
   section 272-45
   section 272-90
   subsection 272-90(7)
   paragraph 272-90(7)(b)

Keywords
Charitable trusts
Family group
Family trust distribution tax
Family trust election
Family trusts
Interposed entity election
Trust distributions

Business Line:  Losses and CGT Centre of Expertise

Date of publication:  20 February 2004

ISSN: 1445-2782