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Taxation Administration Act 1953

SCHEDULE 1 - COLLECTION AND RECOVERY OF INCOME TAX AND OTHER LIABILITIES

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Note: See section 3AA .

Chapter 2 - Collection, recovery and administration of income tax

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PART 2-10 - PAY AS YOU GO (PAYG) INSTALMENTS

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Division 45 - Instalment payments

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Subdivision 45-I - Trust income included in instalment income of beneficiary

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SECTION 45-280 INSTALMENT INCOME FOR A PERIOD IN WHICH YOU ARE A BENEFICIARY OF A TRUST

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45-280(1)
Your instalment income for a period (the current period ) includes an amount for each trust of which you are a beneficiary at any time during the current period. The amount is worked out using the formula:

Your assessable income from
the trust for the last income year
Trust ' s *instalment income
for that income year

Trust ' s
*instalment income
for the current period

45-280(2)

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For the purposes of the formula in subsection (1):

your assessable income from the trust for the last income year
means so much of a share of the trust ' s net income for an income year as:

(a) Division 6 of Part III of the Income Tax Assessment Act 1936 included in your assessable income for the most recent income year:

(i) that ended before the start of the current period; and

(ii) for which you have an assessment, or for which the Commissioner has notified you that you do not have a taxable income; and

(b) is not attributable to a *capital gain made by the trust.

Note:

For exceptions to paragraph (b), see section 45-290 .

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45-280(3)
However, if for any reason the component defined in subsection (2) does not exist or is a nil amount, or the trust had no *instalment income for that income year, your instalment income for the current period includes, for that trust, an amount that is fair and reasonable having regard to:

(a) the extent of your interest in the trust, and your interest in the income of the trust, during the current period; and

(b) the trust ' s *instalment income for the current period; and

(c) any other relevant circumstances.

Exception for corporate unit trusts and public trading trusts

45-280(4)

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Your instalment income for the current period does not include an amount for a trust if the trustee is liable to be assessed, and to pay tax, under section 102S of the Income Tax Assessment Act 1936 for the income year that is or includes that period.

Note:

Your instalment income will still include a distribution by the trust that is ordinary income. See section 45-120 .

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History

S 45-280(4) amended by No 53 of 2016, s 3 and Sch 5 item 73, by omitting " 102K or " before " 102S " , applicable to assessments for income years starting on or after 1 July 2016. No 53 of 2016 (as amended by No 15 of 2019), s 3 and Sch 5 Pt 4 contains the following transitional provision:

Part 4 - Transitional
75 Transitional rule for 20% tracing requirement and repeal of Division 6B - imputation
(1)
This item applies if at a time (the cessation time ), on or after the commencement of this Schedule, either:

(a) section 102K of the Income Tax Assessment Act 1936 ceases to apply to the trustee of a trust because of the repeal of that section by Part 2 of this Schedule; or

(b) section 102S of that Act ceases to apply to the trustee of a trust because of the amendment made by Part 1 of this Schedule.

(2)
Subitems (3) and (3A) apply if:

(a) an event happens in respect of the trust that is described in:

(i) the table in subsection 205-15(1) of the Income Tax Assessment Act 1997 ; or

(ii) the table in subsection 205-30(1) of that Act; and

(b) the event happens on or after the cessation time but before 1 July 2019; and

(c) the event is:

(i) the trust paying income tax for an income year starting before 1 July 2016; or

(ii) the trust paying a PAYG instalment in respect of income tax for an income year starting before 1 July 2016; or

(iii) the trust receiving a refund of income tax for an income year starting before 1 July 2016; or

(iv) the trust franking a distribution; or

(v) the trust ceasing to be a franking entity.

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History

S 75(2) amended by No 15 of 2019, s 3 and Sch 1 items 34 - 36, by substituting " Subitems (3) and (3A) apply " for " Subitem (3) applies " , " 1 July 2019 " for " 1 July 2018 " in para (b) and inserting para (c)(v), effective 1 April 2019 and applicable in relation to the 2018-19 income year and later income years.

(2A)
However, subparagraph (2)(c)(v) does not apply unless the trust ' s franking account is in surplus immediately before the trust ceases to be a franking entity.
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S 75(2A) inserted by No 15 of 2019, s 3 and Sch 1 item 37, effective 1 April 2019 and applicable in relation to the 2018-19 income year and later income years.

(3)
For the purposes of determining whether a franking credit or franking debit arises in the trust ' s franking account as a result of the event:

(a) treat the trust as a corporate tax entity at the time the event happens; and

(b) treat the trust as satisfying the residency requirement in section 205-25 of the Income Tax Assessment Act 1997 for the income year in which the event happens.

(3A)
If the event is an event described in item 4 of the table in subsection 205-30(1) of the Income Tax Assessment Act 1997 , treat the event as happening on 1 July 2019.
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S 75(3A) inserted by No 15 of 2019, s 3 and Sch 1 item 38, effective 1 April 2019 and applicable in relation to the 2018-19 income year and later income years.

(4)
Subitems (5) and (6) apply if:

(a) the trust makes a distribution on or after the cessation time but before 1 July 2019; and

(b) the trust ' s franking account is in surplus just before the trust makes the distribution; and

(c) the distribution is not made out of income derived in relation to the 2016-17 income year or a later income year.
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S 75(4) amended by No 15 of 2019, s 3 and Sch 1 items 39 - 41, by substituting " Subitems (5) and (6) apply " for " Subitem (5) applies " , " 1 July 2019 " for " 1 July 2018 " in para (a) and inserting para (c), effective 1 April 2019 and applicable in relation to the 2018-19 income year and later income years.

(5)
For the purposes of determining whether the trust franks the distribution as a result of the event:

(a) treat the trust as a corporate tax entity at the time it makes the distribution; and

(b) treat the trust as satisfying the residency requirement in section 202-20 of the Income Tax Assessment Act 1997 at the time it makes the distribution.

(6)
Treat a beneficiary of the trust who receives the distribution as receiving, for the purposes of the income tax law, a dividend from a corporate tax entity.
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S 75(6) inserted by No 15 of 2019, s 3 and Sch 1 item 42, effective 1 April 2019 and applicable in relation to the 2018-19 income year and later income years.

Note:

As a result, the trust will satisfy the requirement in paragraph 202-5(a) of that Act in respect of the distribution. If the other requirements in section 202-5 of that Act are satisfied in respect of the distribution, this means that the trust franks the distribution.

S 45-280(4) inserted by No 44 of 2000.

Exception for certain resident unit trusts

45-280(5)

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Your instalment income for the current period does not include an amount for a trust under subsection (1) if the conditions in either subsection 45-285(1) or (2) are satisfied for you for that trust for that period.

Note:

Your instalment income will instead include a distribution by the trust: see section 45-285 .

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Exception for trusts whose beneficiary is absolutely entitled

45-280(6)

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Your instalment income for the current period does not include an amount for a trust under subsection (1) if, throughout the current period:

(a) the trustee of the trust did not have any active duties to perform in the management of the trust (other than the duty to deal with the trust income and capital in accordance with any requests made or directions given by the beneficiary or beneficiaries); and

(b) if there was only one beneficiary, the beneficiary:

(i) was absolutely entitled to the trust assets; and

(ii) had a vested and indefeasible interest in any trust income arising from time to time; and

(c) if there was more than one beneficiary, each beneficiary:

(i) was absolutely entitled to that beneficiary ' s interest in the trust assets; and

(ii) had a vested and indefeasible interest in a proportion of any trust income arising from time to time, being a proportion that corresponded to the beneficiary ' s proportional interest in the trust capital.

Instead, your instalment income for the current period includes the following amount:

Your proportion of the vested
and indefeasible interests in the
trust income arising from time to
time

Trust ' s *instalment income
for the current period

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