Income Tax (Transitional Provisions) Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 842 - Exempt Australian source income and gains of foreign residents  

Subdivision 842-I - Investment manager regime  

SECTION 842-215   Treatment of foreign resident beneficiary that is not a trust or partnership  

Objects

842-215(1)    
The objects of this section are to ensure that:

(a) a foreign resident beneficiary of an IMR foreign fund in relation to the 2010-11 income year or an earlier income year is not subject to Australian income tax in respect of pre-2012 IMR income or a pre-2012 IMR capital gain of the fund (or in respect of an amount that is referable to pre-2012 IMR income or a pre-2012 IMR capital gain of the fund) for the income year; and

(b) the foreign resident beneficiary of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is:

(i) pre-2012 IMR income of the fund (or referable to pre-2012 IMR income of the fund); or

(ii) a pre-2012 IMR capital gain of the fund (or referable to a pre-2012 IMR capital gain of the fund); and

(c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities).

Application

842-215(2)    
This section applies to a beneficiary of a trust in relation to the 2010-11 income year, or an earlier income year, if:

(a) the beneficiary is not a resident of Australia at any time during the income year; and

(b) the beneficiary is not a trust or partnership at any time during the income year (other than a foreign superannuation fund); and

(c) neither the trust nor the beneficiary has lodged an income tax return in relation to the 2010-11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and

(d) the Commissioner did not, before 18 December 2010, make an assessment of the beneficiary for any income year.

Note:

A trust that is an IMR foreign fund is generally subject to the general tax rules that apply to trusts, subject to the modifications in this Subdivision: see Division 6 of Part III of the Income Tax Assessment Act 1936 . Also see section 842-225 of this Act, which deals with trustees of IMR foreign funds.

Adjustments to calculation of taxable income, tax loss or net capital loss

842-215(3)    
In working out the beneficiary ' s taxable income, tax loss or net capital loss for the income year:

(a) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre-2012 non-IMR net income (within the meaning of subsection 842-240(1) of the Income Tax (Transitional Provisions) Act 1997 ); and

(b) for the purposes of applying subsections 98A(1) and (3) of Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in those subsections to individual interest of the beneficiary in the net income with references to individual interest of the beneficiary in the pre-2012 non-IMR net income (within the meaning of subsection 842-240(1) of the Income Tax (Transitional Provisions) Act 1997 ); and

(c) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to Division 6E net income with references to pre-2012 non-IMR Division 6E net income (within the meaning of subsection 842-240(2) of the Income Tax (Transitional Provisions) Act 1997 ); and

(d) in applying subsection 115-215(3) of the Income Tax Assessment Act 1997 to the beneficiary, replace the reference in that subsection to each capital gain of the trust estate with a reference to each capital gain of the trust estate that is a pre-2012 non-IMR net capital gain (or is referable to a pre-2012 non-IMR net capital gain of the trust estate) (within the meaning of subsection 842-240(3) of the Income Tax (Transitional Provisions) Act 1997 ); and

(e) in applying section 115-225 of the Income Tax Assessment Act 1997 to the beneficiary:

(i) replace references in that section to net income of the trust estate with references to pre-2012 non-IMR net income of the trust estate (within the meaning of subsection 842-240(1) of the Income Tax (Transitional Provisions) Act 1997 ); and

(ii) replace the reference in that section to net capital gain (if any) with a reference to pre-2012 non-IMR net capital gain (if any) (within the meaning of subsection 842-240(3) of the Income Tax (Transitional Provisions) Act 1997 ).

842-215(4)    
For the purposes of applying paragraph 115-225(1)(a) of the Income Tax Assessment Act 1997 to the beneficiary in respect of the income year:

(a) disregard a capital gain of the trust to the extent the capital gain is a pre-2012 IMR capital gain (or is referable to a pre-2012 IMR capital gain of the fund); and

(b) disregard a pre-2012 IMR capital loss of the trust for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102-5(1) of that Act; and

(c) disregard a net capital loss of the trust to the extent that it is attributable to a pre-2012 IMR capital loss for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102-5(1) .

Fraud

842-215(5)    
Subsections (3) and (4) do not apply if the Commissioner has reason to believe that there has been fraud by the trust in relation to any income year.

Audit or compliance review

842-215(6)    
Subsections (3) and (4) do not apply if before 18 December 2010 the Commissioner notified the trust that an audit or compliance review would be undertaken in relation to any income year.