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Practice Statement Law Administration

PS LA 2002/11

Escalation of issues concerning fixed entitlements to a share of the income or capital of a trust
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FOI status: may be released
Contents Paragraph
1. What this Practice Statement is about
2. Requests for advice that must be escalated to the Trust Technical Network
3. More information
Attachment

This Practice Statement is an internal ATO document and an instruction to ATO staff.

This Practice Statement advises the circumstances in which issues relating to fixed entitlements to a share of the income or capital of a trust must be escalated to the Trust Technical Network.

1. What this Practice Statement is about

Among other things, the rules contained in Schedule 2F of the Income Tax Assessment Act 1936 (ITAA 1936):

•
establish when a beneficiary has a fixed entitlement to a share of the income or capital of a trust (and thus when the trust is a fixed trust), and
•
provide that the Commissioner of Taxation may exercise a discretion to deem that a person has a fixed entitlement.

The concepts of 'fixed entitlement' and 'fixed trust' are also incorporated in other areas of the tax legislation.

These concepts must be interpreted and applied consistently. This Practice Statement therefore outlines when requests for advice should be escalated to the Trust Technical Network for consideration.

2. Requests for advice that must be escalated to the Trust Technical Network

You must escalate any requests for advice that concern:

•
persons having fixed entitlements to income or capital of a trust under subsection 272-5(1) of Schedule 2F to the ITAA 1936, or
•
the exercise of the discretion to deem a fixed entitlement under subsection 272-5(3) of Schedule 2F to the ITAA 1936.

You must also escalate any requests for advice in relation to the legislative sections outlined in the Attachment to this Practice Statement, where that request requires consideration of the terms 'fixed entitlement' and 'fixed trust'.

3. More information

To find out more, contact the Trust Technical Network.

Attachment

Table 1: Income Tax Assessment Act 1936
Provision Contends with
Schedule 2F Trust loss provisions
Section 102UC Trustee beneficiary reporting
Sections 160APA and 160APHD Franking of dividends

Table 2: Income Tax Assessment Act 1997
Provision Contends with
Section 104-72 Capital gains tax event E4 and trusts
Section 115-50 Discount capital gains
Section 115-110 Foreign or temporary residents - individuals with trust gains
Section 116-35 Capital proceeds - market value substitution rule
Section 118-510 Capital gains tax and venture capital
Section 124-781 Capital gains tax and scrip-for-scrip rollover
Subdivision 165-F Company tax losses - ownership of a company by non-fixed trusts
Section 170-265 Company as a member of a linked group
Section 207-128 Franked distributions - reinvestment choice
Section 415-20 Designated infrastructure entity
Section 703-40 Consolidation: treating entities held through non-fixed trusts as wholly owned subsidiaries
Section 707-325 Consolidation: modified market value of an entity becoming a member of a consolidated group
Section 713-50 Consolidation: determining destination of distribution by non-fixed trust
Section 719-35 Consolidation: treating entities held through non-fixed trusts as wholly owned subsidiaries
Section 725-65 Direct value shifting: cause of the value shift
Section 727-110 Indirect value shifting: common ownership nexus test
Sections 727-360, 727-365, 727-400 and 727-410 Indirect value shifting: control, common ownership and ultimate stake tests
Section 855-40 Capital gains or losses of foreign residents

Table 3: A New Tax System (Goods and Services Tax) Regulations 2019
Provision Contends with
Sections 48-10.03A and 196-1.01 Approval of GST groups

Table 4: Schedule 1 to the Taxation Administration Act 1953
Provision Contends with
Section 45-287 Trust income included in instalment income of a beneficiary

Amendment history

24 October 2024
Part Comment
Throughout Content checked for technical accuracy and currency.

Updated in line with current ATO style and accessibility requirements.

9 July 2015
Part Comment
All Update to new LAPS format and style.

27 June 2013
Part Comment
Throughout Omitted all occurrences of 'Trust Community of Practice'; substituted 'Trust Technical Network'.

28 June 2012
Part Comment
Throughout Updated to reflect the changed responsibilities for the administration of Trust loss measures.

21 May 2012
Part Comment
Contact details Updated.

6 August 2008
Part Comment
Contact details Updated.


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