INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIAA - FRANKING OF DIVIDENDS  

Division 1A - Circumstances in which a taxpayer can qualify for a franking credit, a franking rebate or the intercorporate dividend rebate  

Subdivision A - Preliminary  

SECTION 160APHL   TRUSTEE HOLDING SHARES OR INTEREST IN SHARES: HOW TO DETERMINE A BENEFICIARY'S INTEREST IN THE SHARES  

160APHL(1)   Application in respect of a trust other than a widely held trust.  

If:

(a) the trustee of a trust other than a widely held trust holds, or holds an interest in, a share (the relevant share ); and

(b) an amount is included in the assessable income of the trust estate because of the trust holding and the whole or a part of that amount (the dividend income ) is:

(i) a dividend; or

(ii) attributable, through one or more interposed trusts or partnerships, to a dividend; and

(c) there is a trust amount in respect of the trust estate in relation to a taxpayer who is a beneficiary of the trust estate, being a trust amount that is wholly or partly attributable to the dividend income;

this section sets out how the taxpayer's interest in the relevant share is to be calculated in determining whether the taxpayer is a qualified person for the purposes of Subdivision B or BA in relation to a dividend paid on the share.

Note:

The calculation is not required unless the trustee is a qualified person in relation to the dividend. If the trustee is not a qualified person, no beneficiary of the trust can receive a franking rebate or franking credit through the trust.

160APHL(2)   Application in respect of widely held trust.  

If:

(a) the trustee of a trust that is a widely held trust has held or holds, or has held or holds interests in, shares (the relevant shares ); and

(b) an amount is included in the assessable income of the trust estate because of the trust holding and the whole or a part of that amount (the dividend income ) is:

(i) a dividend; or

(ii) attributable, through one or more interposed trusts or partnerships, to a dividend; and

(c) there is a trust amount in respect of the trust estate in relation to a taxpayer who is a beneficiary of the trust estate, being a trust amount that is wholly or partly attributable to the dividend income;

this section sets out how the taxpayer's interest in the relevant shares is to be calculated in determining whether the taxpayer is a qualified person for the purposes of Subdivision B or BA in relation to a dividend paid on the shares.

Note:

The calculation is not required unless the trustee is a qualified person in relation to the dividend. If the trustee is not a qualified person, no beneficiary of the trust can receive a franking rebate or franking credit through the trust.

160APHL(3)   Trust holding in relation to trust other than a widely held trust.  

For the purposes of the application of this section in respect of a trust other than a widely held trust, the trust holding is the share, or the interest in a share, that is held by the trustee as mentioned in subsection (1).

160APHL(4)   Trust holding in relation to a widely held trust.  

For the purposes of the application of this section in respect of a widely held trust, the trust holding is all the shares and interests in shares that the trustee has held or holds as mentioned in subsection (2).

160APHL(5)   Calculation of interest under a trust other than a widely held trust.  

For the purposes of subsections 160APHG(3) and (4) in relation to a taxpayer referred to in subsection (1), the taxpayer's interest in the relevant share is the amount worked out by using the formula:

Trust holding   ×

Beneficiary's share of the dividend income             The dividend income

where:

beneficiary's share of dividend income
means the trust amount in relation to the taxpayer to the extent to which that amount is attributable to the dividend income.

160APHL(6)   Calculation of interest under a widely held trust.  

For the purposes of subsections 160APHG(5) to (8) in relation to a taxpayer referred to in subsection (2), the taxpayer's interest in the relevant shares is the amount worked out by using the formula:

Trust holding   ×

Beneficiary's share of the dividend income             The dividend income

where:

beneficiary's share of dividend income
means the trust amount in relation to the taxpayer to the extent to which that amount is attributable to the dividend income.

160APHL(7)   Taxpayer's interest to be a long position.  

The taxpayer's interest in the relevant share worked out under subsection (5), or the taxpayer's interest in the relevant shares worked out under subsection (6), is a long position with a delta of + 1 in relation to itself.

160APHL(8)   Trust other than widely held trusts: when trustee's position attributed to taxpayer.  

If the trust is not a widely held trust, a position, or an appropriate part of a position, of the trustee in relation to the trust holding is taken to be a position of the taxpayer to the extent to which the position relates to the taxpayer's interest in the relevant share. However, if the trustee has a position in relation to 2 or more shares or interests in shares, the trustee's position is taken to constitute separate positions in relation to each of the shares or interests in accordance with an allocation made in a reasonable way.

160APHL(9)   When a position of the trustee of a trust other than a widely held trust relates to the taxpayer's interest.  

Without limiting by implication the circumstances in which a position of the trustee of a trust other than a widely held trust will be taken to relate to the taxpayer's interest in a share or shares, a position of the trustee relates to that interest if:

(a) the position relates wholly or partly to shares in which the taxpayer has a vested and indefeasible interest; or

(b) the whole or a part of the profits or losses from the position will be distributed to, or deducted from an amount that would otherwise be distributed to, the taxpayer; or

(c) the benefit or detriment of the position will be wholly or partly passed to the taxpayer.

160APHL(10)   Additional positions of the taxpayer.  

If:

(a) the trust is not a family trust within the meaning of Schedule 2F; and

(b) the trust is not a trust for the purposes of this Act merely because of the reference to executors and administrators in paragraph (a) of the definition of trustee in subsection 6(1) ; and

(c) the taxpayer's interest in the relevant share or the relevant shares is not an employee share scheme security;

the taxpayer has, in addition to any other long and short positions (including the positions that the taxpayer is taken to have under subsection (8)) in relation to the taxpayer's interest in the relevant share or relevant shares, a short position equal to the taxpayer's long position under subsection (7) and a long position equal to so much of the taxpayer's interest in the trust holding as is a fixed interest.

160APHL(11)   A vested and indefeasible interest constitutes a fixed interest.  

For the purposes of subsection (10), the taxpayer's interest in the trust holding is a fixed interest to the extent that the interest is constituted by a vested and indefeasible interest in so much of the corpus of the trust as is comprised by the trust holding.

160APHL(12)   Certain interests in trust holding taken to be defeasible.  

Subject to subsection (13), if the taxpayer has an interest in the trust holding and either:

(a) the interest may be redeemed under the terms of the trust for less than its value; or

(b) the value of the interest may be materially reduced by:

(i) if the trust is a unit trust - the issue of further units; or

(ii) otherwise - the creation of other interests under the trust;

the interest is taken to be defeasible.

160APHL(13)   Case where interest not defeasible.  

If:

(a) the trust is a unit trust and the taxpayer holds units in the unit trust; and

(b) the units are redeemable or further units are able to be issued; and

(c) where units in the unit trust are listed for quotation in the official list of an approved stock exchange (within the meaning of section 470 ) - the units held by the taxpayer will be redeemed, or any further units will be issued, for the price at which other units of the same kind in the unit trust are offered for sale on the approved stock exchange at the time of the redemption or issue; and

(d) where the units are not listed as mentioned in paragraph (c) - the units held by the taxpayer will be redeemed, or any further units will be issued, for a price determined on the basis of the unit trust's net asset value, according to Australian accounting principles, at the time of the redemption or issue;

then the mere fact that the units are redeemable, or that the further units are able to be issued, does not mean that the taxpayer's interest, as a unit holder, in so much of the corpus of the trust as is comprised by the trust holding is defeasible.

160APHL(14)   Commissioner may determine an interest to be vested and indefeasible.  

If:

(a) the taxpayer has an interest in so much of the corpus of the trust as is comprised by the trust holding; and

(b) apart from this subsection, the interest would not be a vested or indefeasible interest; and

(c) the Commissioner considers that the interest should be treated as being vested and indefeasible, having regard to:

(i) the circumstances in which the interest is capable of not vesting or the defeasance can happen; and

(ii) the likelihood of the interest not vesting or the defeasance happening; and

(iii) the nature of the trust; and

(iv) any other matter the Commissioner thinks relevant;

the Commissioner may determine that the interest is to be taken to be vested and indefeasible.

160APHL(15)   Effect of determination.  

A determination made under subsection (14) has effect according to its terms.