Tax Laws Amendment (2011 Measures No. 5) Act 2011 (62 of 2011)

Schedule 2   Interim changes to the taxation of trust income

Part 1   Main amendments

Income Tax Assessment Act 1936

7   After Division 6D of Part I

Insert:

Division 6E - Adjustment of Division 6 assessable amount in relation to capital gains, franked distributions and franking credits

102UW Application of Division

This Division applies if:

(a) the net income of a trust estate exceeds nil; and

(b) any of the following things are taken into account in working out the net income of the trust estate:

(i) a capital gain (to the extent that an amount of the capital gain remained after applying steps 1 to 4 of the method statement in subsection 102-5(1) of the Income Tax Assessment Act 1997);

(ii) a franked distribution (to the extent that an amount of the franked distribution remained after reducing it by deductions that were directly relevant to it);

(iii) a franking credit.

102UX Adjustment of Division 6 assessable amount in relation to capital gains, franked distributions and franking credits

(1) Make the assumptions in the following subsections for the purposes of working out in accordance with Division 6 an amount:

(a) included in the assessable income of a beneficiary of a trust estate under section 97, 98A or 100; or

(b) in respect of which a trustee of a trust estate is liable to pay tax under section 98, in relation to a beneficiary of the trust estate; or

(c) in respect of which a trustee of a trust estate is liable to pay tax under section 99 or 99A.

Note: Those assumptions are made only for the purposes of working out the amounts mentioned in paragraphs (a), (b) and (c). They are not made for any other purposes (for example, determining the income of a trust estate, the net income of a trust estate, or the amount of a present entitlement of a beneficiary of a trust estate to the income of the trust estate).

(2) Assume that the income of the trust estate were equal to the Division 6E income of the trust estate.

(3) Assume that the net income of the trust estate were equal to the Division 6E net income of the trust estate.

(4) Assume that the amount of a present entitlement of a beneficiary of the trust estate to the income of the trust estate were equal to the amount of the beneficiary’s Division 6E present entitlement to the income of the trust estate.

102UY Interpretation

(1) Expressions used in this Division have the same meaning as in Division 6.

(2) The Division 6E income , of the trust estate, is the income of the trust estate worked out on the assumption that amounts attributable to the things mentioned in paragraph 102UW(b) were disregarded. The Division 6E income of the trust estate cannot be less than nil.

(3) The Division 6E net income , of the trust estate, is the net income of the trust estate worked out on the assumption that the things mentioned in paragraph 102UW(b) were disregarded. The Division 6E net income of the trust estate cannot be less than nil.

(4) A beneficiary of the trust estate has an amount of a Division 6E present entitlement to the income of the trust estate that is equal to the amount of the beneficiary’s present entitlement to the income of the trust estate, decreased by:

(a) for each capital gain taken into account as mentioned in paragraph 102UW(b) - so much of the beneficiary’s share of the capital gain as was included in the income of the trust estate; and

(b) for each franked distribution taken into account as mentioned in paragraph 102UW(b) - so much of the beneficiary’s share of the franked distribution as was included in the income of the trust estate.

(5) The following expressions in this Division have the same meaning as in the Income Tax Assessment Act 1997:

(a) share of a capital gain (see section 115-227 of that Act);

(b) share of a franked distribution (see section 207-55 of that Act).