Income Tax Assessment Act 1936

SCHEDULE 2F - TRUST LOSSES AND OTHER DEDUCTIONS  

Division 272 - Interpretation  

Subdivision 272-D - Family trust etc.  

SECTION 272-80   FAMILY TRUST ELECTION  

Nature of election

272-80(1)    
Subject to this section, the trustee of the trust may make an election (the family trust election ) in accordance with this section that the trust is a family trust for the purposes of this Schedule at all times after the beginning of a specified income year.

How election made

272-80(2)    

The election must be in writing and in the approved form.

Election to specify individual and certain information

272-80(3)    
The election must also specify an individual as the individual whose family group is to be taken into account in relation to the election, and must contain such other information as the Commissioner requires.

Trust must pass family control test

272-80(4)    
If the trust does not pass the family control test (see section 272-87 ) at the end of the specified income year, the trustee must not make the election.

Earlier year may be the specified year

272-80(4A)    

The specified income year may be a year before the one in which the election is made if:

(a) at all times in the period from the beginning of the specified income year until 30 June in the income year before the one during which the election is made, the trust passes the family control test (see section 272-87 ); and

(b) either:

(i) any conferrals of present entitlement to income or capital of the trust made by the trustee during that period have been made on; or

(ii) any distributions of income or capital of the trust made by the trustee during that period have been made to;

the individual specified in the election or members of that individual ' s family group.

Election generally cannot be varied or revoked

272-80(5)    

Subject to subsections (5A), (5B), (5C), (6) and (6A), the election cannot be varied or revoked.

Variation cases

272-80(5A)    

The trustee of a trust may, in respect of an income year during the period specified in subsection (6B), vary an election so that a different individual (the new individual ) is specified for the purposes of subsection (3) as the individual whose family group is to be taken into account in relation to the election if:

(a) the new individual was a member of the family of the individual originally specified in the election at the election commencement time; and

(b) any conferrals of present entitlement to income or capital of:

(i) the trust; and

(ii) an entity for which an interposed entity election has been made in relation to the trust;

during the period in which the election has been in force have been made on the new individual or on persons who would have been members of the new individual ' s family group at the time of the conferral; and

(c) any distributions of income or capital of:

(i) the trust; and

(ii) an entity for which an interposed entity election has been made in relation to the trust;

during the period in which the election has been in force have been made to the new individual or to persons who would have been members of the new individual ' s family group at the time of the distribution.

272-80(5B)    

A variation of an election under subsection (5A) in relation to a trust can only be made once.

272-80(5C)    

The trustee of a trust may vary an election so that a different individual (the new individual ) is specified for the purposes of subsection (3) as the individual whose family group is to be taken into account in relation to the election if:

(a) an order; or

(b) an agreement; or

(c) an award;

of a kind mentioned in paragraphs 126-5(1)(a) to (f) of the Income Tax Assessment Act 1997 results in the new individual, or a group comprising the new individual and members of the new individual ' s family, having control of the trust under subsection (5D).

272-80(5D)    

The new individual, or a group comprising the new individual and members of the new individual ' s family, have control of the trust for the purposes of subsection (5C) if any of paragraphs 272-87(2)(a) to (g) are satisfied in relation to a group consisting of:

(a) the new individual; or

(b) the new individual and members of the new individual ' s family.

Revocation cases

272-80(6)    
The trustee of a fixed trust may revoke the election if:

(a) at the beginning of the specified income year:

(i) the individual specified in the election; or

(ii) one or more members of the individual ' s family; or

(iii) the trustee of another trust that is a family trust, provided the individual is specified in that trust ' s family trust election;

or any combination of the above, had the fixed entitlements, directly or indirectly, and for their own benefit, to all of the income and capital of the trust; and

(b) at a later time (whether before or after the return is furnished, but while the trust is still a fixed trust), an individual, other than one of a kind mentioned in subparagraph (a)(i), (ii) or (iii), holds a fixed entitlement, directly or indirectly, and for his or her own benefit, to any of the income or capital of the trust.

272-80(6A)    

The trustee of a trust may, in respect of an income year during the period specified in subsection (6B), revoke the election unless:

(a) the trust, or another entity, has incurred a tax loss and had its assessable income reduced by part or all of the loss in an income year or years during the period:

(i) beginning at the beginning of the income year specified in the election; and

(ii) finishing at the end of the income year immediately prior to the income year from which the revocation is to be effective (see subsection (8));

and the trust, or the other entity, could not have had its assessable income so reduced had the election not been in force; or

(b) the trust, or another entity, has claimed a deduction for bad debts in an income year or years during the period specified in paragraph (a) and the trust, or the other entity, could not have claimed the deduction had the election not been in force; or

(c) a beneficiary of the trust in an income year during the period specified in paragraph (a) received a franked distribution indirectly through the trust and paragraph 207-150(1)(a) of the Income Tax Assessment Act 1997 would have applied in relation to the distribution had the election not been in force.

Period to vary or revoke the election

272-80(6B)    

The trustee of a trust cannot vary or revoke the election under subsections (5A) or (6A) unless the variation or revocation is in respect of an income year that occurs during the period:

(a) beginning at the beginning of the income year specified in the election and finishing at the end of the fourth income year after the income year specified in the election; or

(b) beginning at the beginning of the income year in which Schedule 8 to the Tax Laws Amendment (2007 Measures No 4) Act 2007 commenced and finishing at the end of the subsequent income year.

How to vary or revoke the election

272-80(7)    

To revoke an election under subsection (6), the revocation must be made in the trust ' s return of income for the income year in which the later time occurs. If the trustee is not required to give a return for the income year, the revocation must:

(a) be in writing and in the approved form; and

(b) specify the later time; and

(c) be given to the Commissioner before the end of:

(i) 2 months after the end of the income year in which the later time occurs; or

(ii) such later day as the Commissioner allows.

272-80(8)    

To vary or revoke an election under subsection (5A), (5C) or (6A), the variation or revocation must be made in the trust ' s return of income for the income year from which the variation or revocation is to be effective. If the trustee is not required to give a return for the income year, the variation or revocation must:

(a) be in writing and in the approved form; and

(b) specify the income year from which the variation or revocation is to be effective; and

(c) be given to the Commissioner on or before:

(i) 2 months after the end of that income year; or

(ii) such later day as the Commissioner allows.

When election is in force

272-80(9)    

The election is in force:

(a) if it is not revoked - at all times after the election commencement time (see subsection (10)); or

(b) if it is revoked under subsection (6) - at all times from the election commencement time until the later time specified in the revocation; or

(c) if it is revoked under subsection (6A) - at all times from the election commencement time until the end of the income year immediately prior to the income year from which the revocation is to be effective (see subsection (8)).

Election commencement time

272-80(10)    
The election commencement time is:

(a) if the trust does not pass the family control test (see section 272-87 ) at all times in the income year specified - the earliest time from which the trust does pass the family control test for the remainder of that income year; or

(b) in any other case - the beginning of the income year specified.

Only one election

272-80(11)    
The trustee must not make more than one election under this section in relation to the trust.