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Edited version of private advice
Authorisation Number: 1052364104847
Date of advice: 25 February 2025
Ruling
Subject: Capital raising
Question 1
Can XX Family Trust distribute 100% of its profits to its resident beneficiary company YY Pty Ltd without the requirement to withhold tax?
Answer 1
Yes. Distributions from a Trust to a resident beneficiary company are generally not subject to withholding tax provided that the trust deed allows for such distributions and the company complies with all relevant tax laws and regulations.
Question 2
Is YY Ptd Ltd considered to be a base rate entity such that it pays XX% tax on the distributions it receives from XX Family Trust?
Answer 2
Yes. YY Pty Ltd aggregated turnover for the year ended 30 June 202X of $XXX,XXX which it receives from The XX Family Trust, is less than the $XX aggregated turnover threshold required to qualify as a base rate entity. It therefore qualifies for the XX% tax rate for the 202X income year.
This ruling applies for the following period:
1 July 202X to 30 June 202X
The scheme commenced on:
1 July 202X
Relevant facts and circumstances
XX Family Trust receives distributions from a unit trust and then distributes XX% of the profit to its resident corporate beneficiary YY Pty Ltd.
The unit trust is involved with property development in Australia and XX Family Trust holds XX% in this unit trust.
The Trustee of XX Family Trust is a corporate trustee, ZZ Holding Pty Ltd.
Its directors are non-residents, Person XY and Person XX.
The directors of YY Pty Ltd are also Person XY and Person XX.
In previous years the distributions were made to the individual beneficiaries who paid tax at their marginal rate of tax of XX%.
For the financial year ended 30 June 202X, the income was distributed to the corporate trustee, YY Pty Ltd. who paid XX% tax on the income it received.
You provided YY Pty Ltd's financial statements and its Income Tax Return for the year ended 30 June 202X which confirms that its income from trusts was $XXX,XXX less expenses of $xxx which left an operating profit before income tax of $XXX,XXX.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 328-110
Income Tax Rates Act 1986 section 23AA
Income Tax Assessment Act 1936 section 128B