PART III
-
LIABILITY TO TAXATION
Division 6
-
Trust income
History
Div 6 heading substituted by No 12 of 1979.
SECTION 98
LIABILITY OF TRUSTEE
98(1)
Where a beneficiary of a trust estate who is under a legal disability is presently entitled to a share of the income of the trust estate, the trustee of the trust estate shall be assessed and liable to pay tax in respect of:
(a)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(b)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;
as if it were the income of an individual and were not subject to any deduction.
History
S 98(1) amended by No 107 of 1989 and substituted by No 12 of 1979. Former s 98 amended by No 48 of 1950 and No 22 of 1942.
98(2)
[Beneficiary presently entitled by virtue of s 95A(2)]
Where a beneficiary of a trust estate:
(a)
is deemed to be presently entitled to a share of the income of the trust estate of a year of income by virtue of the operation of subsection
95A(2)
;
(aa)
is a natural person and is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate;
(b)
is not a beneficiary to whom subsection
97A(1) or (1A)
applies in relation to the year of income; and
(c)
is not under a legal disability;
the trustee of the trust estate shall be assessed and liable to pay tax in respect of:
(d)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(e)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;
as if it were the income of an individual and were not subject to any deduction.
History
S 98(2) amended by No 107 of 1989, No 29 of 1982 and No 108 of 1981 and inserted by No 19 of 1980.
98(2A)
[
Non-resident beneficiary]
If:
(a)
a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate:
(i)
is a non-resident at the end of the year of income; and
(ii)
is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate; and
(iii)
is not a beneficiary to whom section
97A
applies in relation to the year of income; and
(iv)
is not a beneficiary to whom subsection
97(3)
applies; and
(b)
the trustee of the trust estate is not assessed and is not liable to pay tax under subsection (1) or (2) in respect of any part of that share of the net income of the trust estate;
subsection (3) applies to the trustee in respect of:
(c)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(d)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia.
History
S 98(2A), (3) and (4) substituted for s 98(3) and (4) by
No 79 of 2007
, s 3 and Sch 9 item 1, applicable in relation to income years starting on or after 1 July 2006.
98(3)
[
Liability to tax]
A trustee to whom this subsection applies in respect of an amount of net income is to be assessed and is liable to pay tax:
(a)
if the beneficiary is not a company
-
in respect of the amount of net income as if it were the income of an individual and were not subject to any deduction; or
(b)
if the beneficiary is a company
-
in respect of the amount of net income at the rate declared by the Parliament for the purposes of this paragraph.
Note:
If the trust estate's net income includes a net capital gain, and the beneficiary is a company, Subdivision
115-C
of the
Income Tax Assessment Act 1997
affects the assessment of the trustee.
History
S 98(2A), (3) and (4) substituted for s 98(3) and (4) by
No 79 of 2007
, s 3 and Sch 9 item 1, applicable in relation to income years starting on or after 1 July 2006. S 98(3) formerly read:
98(3)
[Beneficiary presently entitled is a company]
Where a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate
-
(a)
is a company and is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate;
(b)
is a non-resident at the end of the year of income; and
(c)
is not
-
(i)
a beneficiary to whom subsection
97A(1A)
applies in relation to the year of income; or
(ii)
a body, association, fund or organization referred to in subparagraph
97(3)(c)(i) or (ii)
,
the trustee of the trust estate shall be assessed and is liable to pay tax in respect of
-
(d)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(e)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia,
at the rate declared by the Parliament for the purposes of this subsection.
Note:
If the trust estate's net income includes a net capital gain, Subdivision
115-C
of the
Income Tax Assessment Act 1997
affects the assessment of the trustee.
S 98(3) note inserted by No 169 of 1999.
S 98(3) inserted by No 14 of 1983.
Former s 98(3) omitted by No 29 of 1982, amended by No 108 of 1981 and inserted by No 19 of 1980.
98(4)
[
Non-resident beneficiary a trustee of another trust]
If:
(a)
a beneficiary of a trust estate (the
first trust estate
) who is presently entitled to a share of the income of the first trust estate:
(i)
is, in respect of that share of the income of the first trust estate, a beneficiary in the capacity of a trustee of another trust estate; and
(ii)
is not a beneficiary to whom subsection
97(3)
applies; and
(b)
a trustee of the other trust estate is a non-resident at the end of the year of income;
the trustee of the first trust estate is to be assessed and is liable to pay tax in respect of so much of that share of the net income of the first trust estate as is attributable to sources in Australia at the rate declared by the Parliament for the purposes of this subsection.
Note:
If the trust estate's net income includes a net capital gain, Subdivision
115-C
of the
Income Tax Assessment Act 1997
affects the assessment of the trustee.
History
S 98(2A), (3) and (4) substituted for s 98(3) and (4) by
No 79 of 2007
, s 3 and Sch 9 item 1, applicable in relation to income years starting on or after 1 July 2006.
No 79 of 2007
, s 3 and Sch 9 items 31 to 33 contain the following transitional provisions:
31 Transitional provision
-
trusts that ceased to exist before introduction
31
Subsection
98(4)
of the
Income Tax Assessment Act 1936
, as inserted, does not apply in relation to a trustee of a trust that ceased to exist before the Bill for this Act was introduced into the House of Representatives.
32 Transitional provision
-
managed investment trusts
(1)
This item applies in relation to the following income years:
(a)
the first income year starting on or after 1 July 2006;
(b)
the income year immediately prior to the first income year starting on or after the first 1 July after the day on which
No 79 of 2007
receives the Royal Assent
[
ie 21 June 2007];
(c)
each intervening income year (if any).
(2)
In this item, expressions mean the same as in the
Income Tax Assessment Act 1997
.
(3)
Subsection
98(4)
of the
Income Tax Assessment Act 1936
, as inserted, does not apply in relation to a trustee of a trust in relation to an income year to which this item applies if the conditions in subitems (4) to (6) are satisfied for the trust for the income year.
(4)
The trust must be a resident trust estate for the purposes of Division
6
of Part
III
of the
Income Tax Assessment Act 1936
for the income year.
(5)
At each of the times in the income year mentioned in subitem (9), the trust must be a managed investment scheme (as defined by section
9
of the
Corporations Act 2001
) and be operated by a financial services licensee (as defined by section
761A
of that Act) whose licence covers operating such a managed investment scheme.
(6)
At each of the times in the income year mentioned in subitem (9), one of the following must be satisfied:
(a)
units in the trust must be listed for quotation in the official list of an approved stock exchange in Australia;
(b)
the trust must have at least 50 members (ignoring objects of a trust);
(c)
one of the entities covered by subitem (7) must be a member of the trust.
(7)
These are the entities:
(a)
a life insurance company;
(b)
a complying superannuation fund, a complying approved deposit fund or a foreign superannuation fund, being a fund that has at least 50 members;
(c)
a trust that satisfies the conditions in subitems (4) and (5) and also satisfies the condition in paragraph (a) or (b) of subitem (6);
(d)
an entity that is recognised, under a foreign law relating to corporate regulation, as an entity with a similar status to a managed investment scheme and that has at least 50 members;
(e)
a trust:
(i)
interests in which are owned directly by an entity covered by an earlier paragraph; or
(ii)
interests in which are held indirectly by an entity covered by an earlier paragraph through a *chain of trusts;
where the conditions in subitems (4) and (5) are satisfied for the trust, or for each trust in the chain.
(8)
The condition in subitem (6) is not satisfied for a trust at a time if, at that time, one foreign resident individual, directly or indirectly:
(a)
held, or had the right to acquire, interests representing 10% or more of the value of the interests in the trust; or
(b)
had the control of, or the ability to control, 10% or more of the rights attaching to membership interests in the trust; or
(c)
had the right to receive 10% or more of any distribution of income that the trustee may make.
(9)
The times in an income year are:
(a)
for a trust that was in existence throughout the income year
-
the first day and the last day of the income year; and
(b)
for a trust that comes into existence in the income year
-
the time that is 1 month after the time the trust comes into existence, and the last day of the income year; and
(c)
for a trust that ceases to exist in the income year
-
the first day of the income year and the time that is 1 month before the time the trust ceases to exist.
33 Transitional provision
-
intermediaries
(1)
This item applies in relation to the following income years:
(a)
the first income year starting on or after 1 July 2006;
(b)
the income year immediately prior to the first income year starting on or after the first 1 July after the day on which this Act receives the Royal Assent
[
ie 21 June 2007];
(c)
each intervening income year (if any).
(2)
In this item, expressions mean the same as in the
Income Tax Assessment Act 1997
.
(3)
Subsection
98(4)
of the
Income Tax Assessment Act 1936
, as inserted, does not apply to a trustee of a trust in relation to so much of the net income of the trust of an income year to which this item applies as:
(a)
represents income applied by the trustee in making a payment covered by subitem (4); and
(b)
is attributable to a payment made by a trustee of another trust, if the conditions in subitems 32(4) to (6) are satisfied for the other trust for the income year in which the payment made by the trustee of the other trust is made.
(4)
A payment made by a trustee of a trust is covered by this subitem if:
(a)
the payment is made to an entity that is a foreign resident at the time of the payment; and
(b)
at the time of the payment, the trust is carrying on a business that consists predominantly of providing a custodial or depository service (as defined by section
766E
of the
Corporations Act 2001
) pursuant to an Australian financial services licence (as defined by section
761A
of that Act); and
(c)
the payment is made in the course of the business; and
(d)
either:
(i)
the trust is a resident trust estate for the purposes of Division
6
of Part
III
of the
Income Tax Assessment Act 1936
for the income year in which the payment is made; or
(ii)
the business is carried on in Australia through an Australian permanent establishment.
S 98(4) formerly read:
98(4)
[Beneficiary presently entitled not a company]
Where
-
(a)
a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate
-
(i)
is not a company and is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate;
(ii)
is a non-resident at the end of the year of income; and
(iii)
is not a beneficiary to whom subsection
97A(1) or (1A)
applies in relation to the year of income; and
(b)
the trustee of the trust estate is not assessed and is not liable to pay tax in pursuance of subsection (1) or (2) in respect of any part of that share of the net income of the trust estate,
the trustee of the trust estate shall be assessed and is liable to pay tax in respect of
-
(c)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(d)
so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia,
as if it were the income of an individual and were not subject to any deduction.
S 98(4) amended by No 107 of 1989 and inserted by No 14 of 1983.
Former s 98(4) omitted by No 29 of 1982 and inserted by No 19 of 1980.
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