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Edited version of private advice
Authorisation Number: 1051525648569
Date of advice: 10 June 2019
Ruling
Subject: Assessable income
Question
Are the payments you received from the family trust included in your assessable income for income tax purposes?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You and your spouse separated.
Your spouse has arranged for the family trust to make payments to you as a beneficiary for your share of the income of the trust.
You thought that the payments were for child support/maintenance.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 97
Income Tax Assessment Act 1997 Section 51-50
Reasons for decision
Under section 97 of the Income Tax Assessment Act 1936 (ITAA 1936) a beneficiary who is presently entitled to a share of the income of a trust is required to include that share in their assessable income.
The amounts paid to you as a beneficiary of the trust represented a share of the income of the trust. Consequently these amounts are included in your assessable income under section 97 of the ITAA 1936.
Amounts that are otherwise income may be specifically excluded from being included in assessable income by a provision of the taxation legislation.
Section 51-50 of Income Tax Assessment Act 1997 (ITAA 1997) covers the legislative requirements for maintenance payments to a spouse or child to be exempt from assessable income.
Subsection 51-30(3) of ITAA 1997 states a maintenance payment is not exempt, if, in order to make it or a payment to which is attributable, the maintenance payer diverted ordinary income or statutory income upon which the maintenance payer would have otherwise have been liable to income tax.
In your circumstances your ex-spouse has diverted income of the family trust as a maintenance payment to you. They would have been liable to income tax on the amount if it had been distributed to them instead of being diverted to you.
Consequently, the amounts you received as a beneficiary of the family trust do not meet the requirements under section 51-50 of the ITAA 1997 for exemption as maintenance payments.
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