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Edited version of your private ruling
Authorisation Number: 1012353943463
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Ruling
Subject: Trust income
Question
Are distributions of corpus made to you from a non-resident discretionary trust assessable to you?
Answer:
No
This ruling applies for the following period
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2012
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are an Australian resident and over 18 years of age.
You are a beneficiary of a discretionary non resident Trust.
You have not transferred any property, or provided any services, to the Trust.
The Trustee is considering making a distribution of corpus to you.
The Trustees have advised that the distribution would be sourced entirely from the corpus of the Trust.
No other amounts would be distributed or paid to, set aside for, or applied for your benefit during the financial year.
The distribution would be made by way of a bank transfer from the Trustee's bank account in overseas to your bank account in Australia.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 99B(1).
Income Tax Assessment Act 1936 Subsection 99B(2).
Income Tax Assessment Act 1936 Paragraph 99B(2)(a).
Income Tax Assessment Act 1997 Subsection 6-10(4).
Income Tax Assessment Act 1997 Subsection 10-5
Income Tax Assessment Act 1997 Paragraph 102-5
Reasons for decision
Subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes statutory income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Section 10-5 of the ITAA 1997 lists those provisions about statutory income. Included in this list are the following provisions that may apply to the cash you could receive from the Trust including sections 96B of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with income from non-resident trust estates.
Section 96B of the ITAA 1936 provides special rules for calculating the share of the net income where a taxpayer had an interest (including an interest that is to arise at a future time or is contingent on the happening of an event) in a non-resident trust in relation to the 1992-93 or later year of income.
Subsection 99B (1) of the ITAA 1936 provides that where, during a year of income, a beneficiary who was a resident at any time during the year is paid a distribution from a trust, or has an amount of trust property applied for their benefit, that amount is to be included in the assessable income of the beneficiary.
Subsection 99B (2) of the ITAA 1936 modifies the rule in subsection 99B (1) of the ITAA 1936 and has the effect that the amount to be included in assessable income under subsection (1) is not to include any amount that represents either:
· corpus of the trust, but an amount will not be taken to represent corpus to the extent that it is attributable to income derived by the trust which would have been subject to tax had it been derived by a resident taxpayer;
· amounts that would not be included in assessable income of a resident taxpayer if they had been derived by that taxpayer;
· amounts that have been or will be included in the assessable income of the beneficiary under section 97 of the ITAA 1936 or have been liable to tax in the hands of the trustee under sections 98, 99 or 99A of the ITAA 1936;
· an amount that has been included in the assessable income of a taxpayer under Division 6AAA of Part III of the ITAA 1936.
You are an Australian resident beneficiary of the Trust. The payment from the Trust that represents corpus would not be assessable under section 99B of the ITAA 1936, due to the exclusion provided under paragraph 99B (2)(a) of the ITAA 1936.
Accordingly, your distribution of corpus from the Trust is not assessable to you as ordinary or statutory income under section 6-10(4) of the ITAA 1997.
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