Draft Taxation Determination

TD 93/D152

Income tax: where a trustee is assessed under subsection 98(1) of the Income Tax Assessment Act 1936, in respect of a resident individual beneficiary under a legal disability, is the imputation credit on dividends allowed in both the trustee's assessment and the individual's assessment ?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 93/186.

FOI status:

draft only - for comment

Preamble

1. Yes. Both the trustee (section 160AQY) and the beneficiary (section 160AQX) receive the imputation credit. However, the benefit is not actually allowed twice.

2. Under subsection 100(2), a beneficiary who is under a legal disability receives a credit for the tax paid or payable by the trustee on that beneficiary's share of the income entitlement. To calculate this credit, the gross tax payable by the trustee under subsection 98(1) is reduced by the beneficiary's share of the trust's imputation credits. This reduced amount is the credit allowed under subsection 100(2) in the beneficiary's assessment.

Example :- During the year ended 30 June 1992, the ABC Trust derived a net income of $5,000, consisting of a fully franked dividend of $3,050 and the attached imputation credit of $1,950. The sole beneficiary "X" is presently entitled to the trust income, but as a minor, is under a legal disability. In addition to the entitlement to the trust distribution, X derived $2,000 of interest during the year. All income is assessable under the provisions of Division 6AA.

TRUSTEE		BENEFICIARY
The ABC Trust would be assessed under subsection 98(1) on a taxable income of $5,000. The tax assessed would be:-		The beneficiary "X" would be assessed as follows:-
Franked dividend, s44(1)	$3,050	Interest, s25(1)		$2,000
Imputation credit, s160AQT(1)	$1,950	Trust distribution, s100(1)
Taxable Income	$5,000	Franked dividend	$3,050
		Imputation credit	$1,950	$5,000
		Taxable Income		$7,000

TRUSTEE		BENEFICIARY
Tax Payable on $5,000 @ 47%	$2,350	Tax payable on $7,000 @ 47%		$3,290
Less		Less
Imputation credit, s160AQY	$1,950	Imputation credit, s160AQX	$1,950
Tax payable by trustee, s98(1)	$400	Section 100(2) credit	$400	$2,350
		Net Tax payable by Beneficiary		$940

Note :- The combined tax paid by the trustee and the individual is $1,340, being 47% of the total income of $7,000 less the imputation credit of $1,950.

Commissioner of Taxation
10/6/93

References

BO BANTD30

Related Rulings/Determinations:

TD 92/159

Subject References:
beneficiary
franked dividend
imputation system

Legislative References:
ITAA 98(1)
ITAA 100(2)
ITAA 160AQX
ITAA 160AQY