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Edited version of your written advice
Authorisation Number: 1051200700360
Date of advice: 10 March 2017
Ruling
Subject: Trust distribution - Section 99B
Question:
Is any part of the distribution to be included in the Taxpayer's assessable income under section 99B of the Income Tax Assessment Act 1936?
Answer:
No.
This ruling applies for the following periods:
2016-17 income year
2017-18 income year
The scheme commences on:
1 July 1996
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.
The Taxpayer is a citizen of a foreign country. The Taxpayer became a resident of Australia upon entry to Australia about two years ago.
The Trust
A Trust (the Trust) was settled in a foreign country some 20 years ago by one of the Taxpayer's parents (the Settlor).
The Trust is a non-resident discretionary trust.
The Taxpayer is a discretionary beneficiary of the Trust. A sibling is also a beneficiary. The Taxpayer's other parent, who was a beneficiary, passed away recently.
The trustee is an independent non-resident corporate trustee.
The trustee has absolute control of the Trust. All administrative and investment decisions are undertaken by the trustee.
The trustee has advised that they intend to sell the assets of the trust and then vest the trust.
Corpus
The Trust was settled with shares of a private foreign company.
Valuation
Just prior to settlement of the trust, the Settlor obtained a valuation for the shares then held in the private foreign company.
The Settlor gave some shares directly to the other parent and settled the remaining shares on the Trust.
Distribution
The Trustee has distributed small amounts since the creation of the Trust. These distributions appear to have been made from income of the Trust.
The Taxpayer received these distributions while living in a foreign country.
The Taxpayer anticipates receiving a final distribution from the Trust on its vesting in the near future.
Assumption
The anticipated distribution will occur during the period of this ruling.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 99B.
Reasons for decision
Summary
No part of the distribution is to be included in the Taxpayer's assessable income under section 99B of the Income Tax Assessment Act 1936 (ITAA 1936).
Detailed reasoning
The purpose of section 99B of the ITAA 1936 is to include distributions in a beneficiary's assessable income if they are sourced from accumulations that have not previously been subject to income tax in Australia.
Section 99B of the ITAA 1936 applies to all distributions but is subject to specific exceptions to ensure that income tax is not payable twice.
Paragraph 99B(2)(a) of the ITAA 1936 provides another exception where the distribution is sourced from corpus of the trust.
In this case, the source of the final distribution will be referrable to the realised cost base of the shares that were originally settled on the Trust some 20 years ago. This is considered to be corpus of the Trust.
Consequently, this distribution (being of corpus) is not subject to section 99B of the ITAA 1936.
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