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Draft Taxation Determination

TD 92/D196 (Withdrawn)

Income tax: is withholding tax payable on the net dividend and/or interest component when an Australian resident trust makes a distribution to which a non-resident beneficiary is presently entitled?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been Withdrawn.

FOI status:

draft only - for comment

Preamble

Draft Taxation Determinations (TDs) represent the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO.

1. Yes. Withholdng tax on dividend and interest income is payable on the net distribution by the trustee.

2. Subsection 128A(3) of the Income Tax Assessment Act 1936 provides that a trust distribution which includes a dividend and interest component, to which a non-resident beneficiary is presently entitled, is deemed to retain its nature in the hands of the beneficiary. Subsection 95(1) defines the net income of a trust estate, while suparagraph 97(1)(a)(ii) provides details of the entitlement of a non-resident beneficiary to a share of the net income of the trust.

Example:

J. Smith, a non-resident beneficiary is presently entitled to a distribution from the XYZ Family Trust of $4,500 as follows:-

Income rent 5,000
interest 2,000
Total income 7,000
Expense against: Rent 2,000
Interest 500 2,500
Net Trust Income 4,500 - net rental income 3,000
net interest income 1,500

The trustee is liable to pay withholding tax on the beneficiary's share of the net interest income ie: 10% of $1,500

Commissioner of Taxation
29/10/92

References

ATO references:
NO BAN RS

ISSN: 1038-8982

Related Rulings/Determinations:

IT 2680

Subject References:
beneficiaries
trust distributions
withholding tax

Legislative References:
ITAA 95(1)
ITAA 97(1)(a)(ii)
ITAA 128A(3)


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