ATO Interpretative Decision
ATO ID 2008/139
Income Tax
CGT: small business concessions - whether appointor controls discretionary trustFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Does a person who has the power to remove the trustee of a discretionary trust and appoint a new trustee, control the trust for the purposes of subsection 328-125(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. A person who has the power to remove the trustee of a discretionary trust and appoint a new trustee, controls the trust for the purposes of subsection 328-125(3) of the ITAA 1997.
Facts
The terms of the trust deed of Discretionary Trust specify that Appointor has the power to remove any trustee and appoint a new trustee.
Reasons for Decision
For the purposes of the small business concessions, an entity is connected with another entity if either entity controls the other entity in certain ways (paragraph 328-125(1)(a) of the ITAA 1997).
Subsection 328-125(3) of the ITAA 1997 provides that an entity will control a discretionary trust if a trustee of the trust acts, or could reasonably be expected to act, in accordance with the directions or wishes of the entity, its affiliates or the entity together with its affiliates.
If the trust deed of a discretionary trust specifies that the appointor of the trust has the power to remove a trustee and appoint a new trustee, it is considered that the trustee could reasonably be expected to act in accordance with the directions or wishes of the appointor. In this situation, Appointor will control Discretionary Trust under subsection 328-125(3) of the ITAA 1997.
Date of decision: 9 September 2008Year of income: Year ended 30 June 2008
Legislative References:
Income Tax Assessment Act 1997
paragraph 328-125(1)(a)
subsection 328-125(3)
Related Public Rulings (including Determinations)
Taxation Determination TD 2006/67
Keywords
Capital gains
Capital gains tax
CGT event A1-disposal of a CGT asset
CGT small business relief
Connected entity
Maximum net asset value test
Small Business CGT affiliate
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 9 September 2008 | Original statement |
| 3 October 2014 | Archived |