ATO Interpretative Decision
ATO ID 2010/211
Income Tax
Section 99B: receipt of trust income not previously subject to taxFOI status: May be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
For the purpose of paragraph 99B(2)(d) of the Income Tax Assessment Act 1936 (ITAA 1936), is an amount taken to be 'included in the assessable income of any taxpayer' under section 102AAZD of the ITAA 1936 even though the taxpayer has not included the amount in their income tax return?
Decision
Yes. The amount is taken to be included in the assessable income of the taxpayer under section 102AAZD of the ITAA 1936 even though the amount has not been included in the taxpayer's tax return for the purpose of paragraph 99B(2)(d) of the ITAA 1936.
Facts
A resident of Australia was appointed as a beneficiary of a non-resident discretionary trust and received a distribution from the trust in an income year.
The trust had no net income as defined under section 95 of the ITAA 1936 for the current income year. The amount was distributed out of foreign source income derived by the non-resident trust in a prior year which was assessable to a transferor of the trust under section 102AAZD of the ITAA 1936 (section 102AAZD amount).
The transferor did not return the section 102AAZD amount in their income tax return in the prior year. The Commissioner is out of time to amend.
Sections 96B and 96C of the ITAA 1936 did not apply because there was no other beneficiary that had an interest in the non-resident trust at any time.
Reasons for Decision
Subsection 99B(1) of the ITAA 1936 includes as assessable income of a beneficiary an amount paid to or applied for the benefit of the beneficiary of a trust estate.
However, paragraph 99B(2)(d) of the ITAA 1936 excludes an amount 'that is or has been included in the assessable income of any taxpayer (other than a company) under section 102AAZD'. An amount is assessable under section 102AAZD of the ITAA 1936 even though it was not included in the income tax return of the transferor and the Commissioner is out of time to amend the taxpayer's assessment.
The amount is therefore excluded from being assessed to the beneficiary under subsection 99B(1) of the ITAA 1936 by paragraph 99B(2)(d) of the ITAA 1936.
Year of income: Year ended 30 June 2010
Legislative References:
Income Tax Assessment Act 1936
section 95
section 96B
section 96C
section 97
subsection 99B(1)
paragraph 99B(2)(d)
section 102AAZD
ATO ID 2008/155
ATO ID 2008/156
Keywords
International tax
Trusts
Trust distributions
Non resident trusts
ISSN: 1445 - 2782