ATO Interpretative Decision

ATO ID 2004/697 (Withdrawn)

Income tax

Family trusts - family trust elections - two family trusts with the same specified individual
FOI status: may be released

This ATO ID is withdrawn as the new subsection 272-90(3A) of Schedule 2F to the Income Tax Assessment Act 1936 provides that after 1 July 2007, a trust with the same primary individual specified in its family trust election will be a member of the primary individual's "family group" in relation to the conferral or distribution. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of the membership of the primary individual's family group before 1 July 2007.

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

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 two family trusts, that have specified the same test individual in their family trust elections, members of the same family group pursuant to section 272-90 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) without making interposed entity elections?

Decision

No, the two family trusts are only members of the family group in respect of the family trust election (FTE) each trust has made. Each family trust must make an interposed entity election (IEE) to become a member of the same family group.

Facts

The trustees of two trusts have each made a family trust election specifying the same test individual pursuant to section 272-80 of Schedule 2F to the ITAA 1936. The elections are in force.

The two family trusts make distributions of income to each other.

Reasons for Decision

If two family trusts, with the same test individual, are to make distributions to each other without being liable for Family Trust Distribution Tax (FTDT), they must be included in the same family group in relation to the conferral or distribution.

The specified individual's family group is defined in section 272-90 of Schedule 2F to the ITAA 1936, and subsection 272-90(3) includes the trust in respect of which the FTE was made. Subsection 272-90(3) of Schedule 2F states:

The trust in respect of which the family trust election was made is a member of the primary individual's family group in relation to the conferral or distribution.

However, where a trust which has made a family trust election makes a distribution to another trust, in order for that distribution not to attract FTDT, the trust that receives the distribution will need to have made an interposed entity election in accordance with Subsection 272-90(4) of Schedule 2F to the ITAA 1936.

A trust can also be included in the family group of the primary individual if the primary individual, or one or more members of the primary individual's family, or the trustees of one or more family trusts specifying the primary individual in their FTE's or any combination of the above, have fixed entitlements directly or indirectly, and for their own benefit, to all the income and capital of the trust (subsection 272-90(5) of Schedule 2F to the ITAA 1936).

Date of decision: 8 August 2004

Year of income: Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1936
   Schedule 2F
   section 272-75
   subsection 272-80(3)
   section 272-90
   subsection 272-90(3)
   subsection 272-90(4)
   subsection 272-90(5)

Keywords
Family control test
Family group
Family trust election
Family trusts
Interposed entity election
Test individual

Business Line: Losses and CGT Centre of Expertise

Date of publication: 20 August 2004

ISSN: 1445-2782

history

	Date:	Version:
	8 August 2004	Original statement
You are here	12 October 2007	Archived

Copyright notice

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).