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Edited version of your written advice
Authorisation Number: 1013022916415
Date of advice: 24 May 2016
Ruling
Subject: International - trust residency
Questions and answers
1. Is the Trust a resident of Australia for taxation purposes?
Yes.
2. If the answer to question one is yes; did the Trust become a resident of Australian for taxation purposes when the trustees of the Trust became residents of Australia for taxation purposes?
Yes.
3. Is the Trust required to have a tax file number and lodge tax returns in Australia?
Yes.
4. If the answer to question three is yes; can the Trust apply for a substituted accounting period to match Country X's tax accounting period?
Not applicable.
This ruling applies for the following period
1 July 20XX to 30 June 20XX
Relevant facts and circumstances
In XX XX the Trust was established in Country X.
The Trust holds various assets.
The Trust does not carry on a business in Australia.
The Trustees of the Trust were Individual W and Individual Y.
The named beneficiaries of the Trust are Individual W, Individual Z and their relatives.
On XX XX XX Individual Z was appointed as a new trustee in addition to the existing trustees.
On XX XX XX Individual W was made appointer of the Trust.
Individual W, as the appointer, makes the majority of the decisions for the Trust.
On XX XX XX Individual W and Individual Z became Australian residents for taxation purposes.
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 95(2)
Reasons for decision
Division 6 of the Income Tax Assessment Act 1936 (ITAA 1936) distinguishes between a 'resident trust estate' and a 'non-resident trust estate'. Subsection 95(2) of the ITAA 1936 provides that a trust estate shall be taken to be a resident trust estate in relation to a year of income if:
a. A trustee of the trust estate was a resident at any time during the year of income; or
b. The central management and control of the trust estate was in Australia at any time during the year of income.
Application to your circumstances
On XX XX XX two trustees of the Trust became residents of Australia for taxation purposes, the majority of the Trust decisions are made in Australia; therefore, the Trust would qualify as a resident of Australia under subsection 95(2) of the ITAA 1936.
The date the Trust became a resident of Australia will be the date the trustees became residents of Australia for taxation purposes.
Accordingly, the Trust is required to have its own:
• tax file number, which the trustee uses in lodging income tax returns for the trust, and
• A trustee is required to lodge a trust income tax return, regardless of the amount of income involved, unless exempted by the Commissioner.
Further Information
Whether the Trust can apply for a substituted accounting period (SAP) to match Country X tax accounting period is not a tax question, however, for your consideration we provide the following general information.
Section 18 of the Income tax Assessment Act 1936 (ITAA 1936) provides that any person may, with the leave of the Commissioner, adopt an accounting period being the twelve months ending on some date other than 30 June.
The Commissioner's practice in relation to SAP is set out in practice Statement PS LA 2007/21.
The Commissioner considers that Parliament has required a taxpayer to obtain the Commissioner's leave to adopt a SAP because income tax, an annual tax, would be very difficult to administer if every taxpayer was able to nominate his or her own accounting period, with the result that no one period was normal or standard. Regard must be had to this legislative purpose. A decision to grant or withhold leave to adopt a SAP therefore involves a balancing of convenience to the taxpayer with the general public interest in efficient administration of the Act.
Leave will be generally be granted to adopt a SAP where it can be demonstrated that the circumstances take the case out of the "ordinary run' (MLC Investments v FC of T 2003 ATC 5133).
Paragraph 32 of PS LA 2007/21states that there are no restrictions on who can apply for a SAP but it is expected most applicants would be entities, other than individual taxpayers, carrying on a business. It is difficult to identify circumstances in which leave under section 18 of the ITAA 1936 should be granted to individual taxpayers deriving income by way of salary and wages, pensions and or rents, dividends and interest.