In certain circumstances, the trustee of an AMIT may be subject to administrative penalties where particular rules are not followed.
Failure to give an AMMA
The trustee of an AMIT may be liable to an administrative penalty if they fail to give AMMA statements to AMIT members by the required time. The AMMA statement for an income year must be given to the member no later than three months after the end of the income year (see Amount of penalty).
Under or over: intentional or reckless disregard
The trustee of an AMIT is liable to an administrative penalty if it has an under or an over for a base year which resulted from the intentional or reckless disregard of the law by the trustee.
An administrative penalty does not apply where the under or over is reduced because the AMIT has reissued AMMA statements for the base year.
The administrative penalty applies separately to each under or over that the AMIT has for the base year.
The amount of penalty will depend on whether there has been intentional disregard or reckless disregard. If both apply, the penalty applicable to an intentional disregard (which produces the greater amount of penalty) applies to the under or over. These penalties are consistent with the administrative penalties that arise when an individual taxpayer intentionally or recklessly disregards the law in relation to their own income tax affairs.
Intentional or reckless disregard of the law in a particular circumstance is determined in a manner consistent with the existing framework for administrative penalties.
The trustee would not ordinarily be taken to have intentionally or recklessly disregarded the law where – in working out estimates of the trust components of particular characters that are attributed to members – the trustee:
- uses published estimates of amounts expected to be received by the AMIT from third-party funds
- contacts third-party fund managers to request estimates of amounts expected to be received by the AMIT from that third-party fund and, when provided, uses those estimates
- makes reasonable estimates of the distribution yield and tax components based on historical yield and tax component data.
See also:
- Unders and overs for AMITs
- Law Companion Ruling LCR 2015/10 Attribution Managed Investment Trusts: administrative penalties for recklessness or intentional disregard of the tax law – section 288-115
Trustee enters a scheme to reduce tax liabilities
An administrative penalty will be imposed on taxpayers who enter into a scheme to reduce their tax liabilities. Under the new tax system for MITs, the administrative penalty also applies when the trustee of a MIT or AMIT enters into a scheme to derive non-arm’s length income.
Therefore, the trustee of a MIT will be liable to an administrative penalty if:
- we amend an assessment issued to the trustee for the income year under the non-arm’s length income rules, and
- as a result, the trustee is liable to pay an additional amount of income tax.
If the trustee of a MIT or AMIT is liable to an administrative penalty, then the base penalty amount is generally either:
- 50% of the scheme shortfall amount, or
- 25% of the scheme shortfall amount if it is reasonably arguable that the adjustment provision in the non-arm's length income rule does not apply.
The scheme shortfall amount is the total additional income tax that the AMIT is liable to pay as a result of the Commissioner's determination of non-arm's length income or other ATO amendment.
See also:
Amount of penalty, by type
Penalty |
Amount of penalty |
|---|---|
Failure to give an AMMA statement |
Depends on circumstances, one penalty unit for each period or part period of 28 days starting on the day the document is due and ending on the day you give it (up to a maximum of five penalty units). |
Trustee enters into a scheme to reduce tax liabilities |
50% of the scheme shortfall amount, or 25% of the scheme shortfall amount if it is reasonably arguable that the non-arm's length income rule does not apply. |
Unders and overs |
Unders relating to assessable income, exempt income and non-assessable non-exempt income characters and overs of tax offset characters: |
Overs of assessable income, exempt income and non-assessable non-exempt income characters and unders of tax offset characters: |
|---|---|---|
Intentional disregard |
75% of the under or over, multiplied by 47% (see note) |
The lesser of 30% of the under or over, multiplied by 47% (see note), and 60 penalty units |
Recklessness |
50% of the under or over, multiplied by 47% (see note) |
The lesser of 20% of the under or over, multiplied by 47% (see note), and 40 penalty units |
Note: The penalty is worked out based on a 47% rate – that is, the highest marginal tax rate plus the Medicare levy. However, if the base year is an income year in which a temporary budget repair levy applies, the amount of the penalty needs to include an additional 2% to allow for the levy – a 49% rate will apply.