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Edited version of your written advice
Authorisation Number: 1012872697591
Date of advice: 3 September 2015
Ruling
Subject: Family Trust Election
Question 1
If the trustee makes a Family Trust Election specifying A as the primary individual, will B and C be members of the "family group" for the purposes of section 272-90 of Schedule 2F of the Income Tax Assessment Act 1936 (ITAA1936)?
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2013
The scheme commences on
1 July 20XX
Relevant facts and circumstances
The Trust was established by deed of settlement on XXXX.
The trustee is D.
E died in XXXX.
F was the spouse of E prior to their death in XXXX.
E had a child from a previous marriage, A.
F had children from a previous marriage, B and C.
The trustee of the Trust is considering making a Family Trust Election.
The trustee is proposing to nominate A as the primary individual under the FTE.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 272-90 of Schedule 2F
Income Tax Assessment Act 1936 Section 104-75 Section 272-95 of Schedule 2F
Income Tax Assessment Act 1997 Subsection 995-1(1)
Income Tax Assessment Act 1997 Section 960-255
Reasons for decision
The family group of a primary individual is defined by section 272-90 of Schedule 2F of the Income Tax Assessment Act 1936 (ITAA1936). For the purposes of this ruling application, the relevant provisions are subsection 272-90(1) and subsection 272-90(2) of Schedule 2F of the ITAA1936:
(1) This section states whether a person is a member of the family group of the individual (the primary individual) specified in the family trust election in relation to a conferral of a present entitlement to, or a distribution of, income or capital of a company, partnership or trust, upon or to the person.
(2) A member of the primary individual's family is a member of the primary individual's family group in relation to the conferral or distribution.
The definition of family is provided by section 272-95 of Schedule 2F of the ITAA1936:
(1) The family of an individual (the test individual) consists of the test individual and all of the following (if applicable):
(a) any parent, grandparent, brother or sister of the test individual or the test individual's spouse;
(b) any nephew, niece or child of the test individual or the test individual's spouse;
(c) any lineal descendant of a nephew, niece or child referred to in paragraph (b);
(d) he spouse of the test individual or of anyone who is a member of the test individual's family because of paragraphs (a), (b) and (c).
(2) A person does not cease to be a family member merely because of the death of any other family member.
(3) In this section, an adopted child, step-child or ex-nuptial child of a person is taken to be a lineal descendant of that person for the purposes of determining the lineal descendants of that person or any other person.
The definition of child as provided at subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA1997) is:
child: without limiting who is a child of an individual, each of the following is the child of an individual:
(a) the individual's adopted child, stepchild or exnuptial child;
(b) a child of the individual's spouse;
(c) someone who is a child of the individual within the meaning of the Family Law Act 1975.
In this case, A was F's stepchild and a person does not cease to be a family member merely because of a death therefore, A would be considered to be a child of F's as per subsection 995-1(1) if the ITAA 1997. The same relationship would apply for E, B and C.
Section 960-255 of the ITAA1997 provides:
(1) If one individual is the spouse of another individual because of the definition of spouse in subsection 995-1(1), relationships traced to, from or through the individual, and family groups of which either individual is a member, are to be determined in the same way as if the individual were legally married to the other individual.
(2) If one individual is the child of another individual because of the definition of child in subsection 995-1(1), relationships traced to, from or through the individual, and family groups of which either individual is a member, are to be determined in the same way as if the individual were the natural child of the other individual.
(3) Subsections (1) and (2) apply for the purposes of this Act. They also apply for the purposes of a provision of another Act if one or more of the following applies for the purposes of that provision (or would apply if it were used in the provision):
(a) the definition of child in subsection 995-1(1);
(b) the definition of parent in subsection 995-1(1);
(c) the definition of relative in subsection 995-1(1);
(d) the definition of spouse in subsection 995-1(1).
Accordingly, A, B and C are all natural children of E and F. Consequently, B and C are A's siblings and will be considered members of the family group for A as per subsection 272-90(2) of Schedule 2F to the ITAA1936.
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