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Edited version of your private ruling
Authorisation Number: 1012542715331
Ruling
Subject: Section 254
Questions
1. Are you a trustee of the Trust, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936), in your capacity as administrator of the trustee Company?
Answer
No.
2. Are you, as controller of the trustee Company, required to lodge income tax returns on behalf of the Trust?
Answer
Yes.
3. Are you, as controller of the trustee Company, required to retain sufficient amounts to pay tax on monies collected in your representative capacity as administrator of the trustee Company pursuant to paragraph 254(1)(d) of the ITAA 1936?
Answer
Yes.
4. Is your liability under paragraph 254(1)(d) of the ITAA 1936 effectively nil if the trust remains in a net loss position after taking into account the profits and gains from the disposal of its assets?
Answer
Yes.
This ruling applies for the following period(s)
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commences on
1 July 2013
Relevant facts and circumstances
You were appointed voluntary Administrator of the trustee Company pursuant to Section 436A of the Corporations Act.
The trustee Company is the sole trustee of the Trust.
You assumed responsibility for the operations of the trustee Company and therefore the Trust. All financial records of the trustee Company were provided to you at this point.
You assumed control of all accounting records of the Trust when appointed voluntary Administrator.
The Trust is a discretionary trust.
The last income tax return lodged by the Trust discloses large carried forward tax losses.
A family trust election (FTE) was made in respect of the Trust several year ago. This election has not been varied in any way or revoked since the election was originally made.
Whilst the current year income tax return has not been finalised, initial indications are that additional tax losses will have been incurred.
During the 2013-14 financial year, you, in your capacity as administrator of the trustee Company, have received certain monies that may either be considered income under ordinary concepts or capital gains arising from the realisation of trust assets. The amounts received are significantly less than the available losses of the Trust.
You intend to pay the monies collected to the creditors of the Company, as trustee of the Trust.
Relevant legislative provisions
Income Tax Assessment Act 1936 - subsection 6(1)
Income Tax Assessment Act 1936 - subsection 254(1)
Income Tax Assessment Act 1936 - Subdivision 267-B of Schedule 2F
Income Tax Assessment Act 1936 - Section 267-75 of Schedule 2F
Income Tax Assessment Act 1936 - Section 267-80 of Schedule 2F
Income Tax Assessment Act 1936 - Section 267-100 of Schedule 2F
Corporations Act 2001 - Section 437B
Reasons for decision
You were appointed as voluntary administrator of the trustee Company. The Company position as trustee of the Trust has not changed as a result of your appointment.
As administrator of the trustee Company, you are an agent of the company pursuant to section 437B of the Corporations Act. The trustee Company remains the trustee of the trust. As an agent of the trustee Company, and as you control of all accounting records of the Trust, you are required to ensure the trustee company complies with its lodgement obligations as trustee of the trust.
Under paragraph 254(1)(a) of the ITAA 1936, an agent is answerable as taxpayer for all things required to be done by virtue of this Act in respect of the income, or any profits or gains of a capital nature that are derived by the principal by virtue of his or her agency.
In addition, paragraph 254(1)(d) of the ITAA 1936 requires an agent to retain sufficient funds to pay the tax that is or will become due in respect of that income, profits or gains. Specifically, this paragraph states the following:
'he is hereby authorised and required to retain from time to time out of any money which comes to him in his representative capacity so much as is sufficient to pay tax which is or will become due in respect of the income, profits or gains.'
In so far as the amounts received by you are derived by the company by virtue of your agency, they are amounts to which paragraph 254(1)(d) may apply.
However, the amounts received are significantly less than the available losses as disclosed in the 2012 income tax return carried forward by the Trust, such that tax is not, and will not become, payable in respect of the income, profits or gains derived by the company by virtue of your agency. As such, no obligation to retain an amount will arise under paragraph 254(1)(d) of the ITAA.