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 842-225   Treatment of trustee of an IMR foreign fund  

Objects

842-225(1)    
The object of this section is to ensure that the following provisions interact appropriately with the tax concessions mentioned in subsection 842-210(1) , paragraphs 842-215(1)(a) and (b) and paragraphs 842-220(1)(a) and (b) in respect of the 2010-11 income year or an earlier income year:

(a) subsection 115-220(2) of the Income Tax Assessment Act 1997 ;

(b) section 115-225 of the Income Tax Assessment Act 1997 ;

(c) section 98 of the Income Tax Assessment Act 1936 ;

(d) section 99E of the Income Tax Assessment Act 1936 .

Note:

Division 6 of Part III of the Income Tax Assessment Act 1936 , Division 115 of the Income Tax Assessment Act 1997 , and all other provisions of those Acts apply to the trustee of an IMR foreign fund, subject to the modifications in this section.

Application

842-225(2)    
This section applies to the 2010-11 income year or an earlier income year of a trustee of a trust that is an IMR foreign fund in relation to that income year.

Applying subsection 115-220(2) of the Income Tax Assessment Act 1997

842-225(3)    
For the purposes of applying subsection 115-220(2) of the Income Tax Assessment Act 1997 to the beneficiary:

(a) disregard a capital gain of the IMR foreign fund to the extent that the capital gain is a pre-2012 IMR capital gain; and

(b) disregard a pre-2012 IMR capital loss of the IMR foreign fund 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) ; and

(c) disregard a net capital loss of the IMR foreign fund to the extent that it is attributable to a pre-2012 IMR capital loss for the purposes of determining how much of a capital gain that is not a pre-2012 IMR capital gain remains after applying steps 1 to 4 of the method statement in subsection 102-5(1) .

Note:

The effect of this subsection is that the increase to the assessable amount which occurs as a result of section 115-220 of the Income Tax Assessment Act 1997 is calculated with reference to the capital gains of the IMR foreign fund that are not IMR capital gains or amounts referable to IMR capital gains (rather than by calculating the increase with reference to all capital gains of the fund).

Modifications to section 115-225 of the Income Tax Assessment Act 1997

842-225(4)    
For the purposes of applying section 115-225 of the Income Tax Assessment Act 1997 in respect of section 115-220 , make the following assumptions:

(a) replace the references in section 115-225 to the net income of the trust estate with references to the pre-2012 non-IMR net income (within the meaning of subsection 842-240(1) of the Income Tax (Transitional Provisions) Act 1997 ) of the trust estate;

(b) replace the references in section 115-225 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 ).

Modifications to section 98 of the Income Tax Assessment Act 1936

842-225(5)    
For the purposes of applying section 98 of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010-11 income year or an earlier income year, replace references in that section to net income with references to pre-2012 non-IMR net income (within the meaning of subsection 842-240(1) of the Income Tax (Transitional Provisions) Act 1997 ).

Note:

The effect of this subsection is that where section 98 of the Income Tax Assessment Act 1936 applies to the trustee of a trust that is an IMR foreign fund, the trustee is only assessed and made liable to pay tax in respect of pre-2012 non-IMR net income of the fund (rather than in respect of all net income of the fund to which section 98 would otherwise apply).

Modifications to section 99E of the Income Tax Assessment Act 1936

842-225(6)    
For the purposes of applying section 99E of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010-11 income year or an earlier income year:

(a) replace the reference to so much of the net income with a reference to so much of the net income or pre-2012 non-IMR net income (within the meaning of subsection 842-240(1) of the Income Tax (Transitional Provisions) Act 1997 ) as the case may be; and

(b) replace the reference to a part of the net income of another trust estate with a reference to a part of the pre-2012 non-IMR net income (within the meaning of subsection 842-240(1) of the Income Tax (Transitional Provisions) Act 1997 ) of another trust estate.

Note:

The effect of this subsection is that the trustee of a trust that receives a distribution of pre-2012 non-IMR net income from another trust is not required to apply section 98 , 99 or 99A of the Income Tax Assessment Act 1936 to those amounts.

Certain losses disregarded

842-225(7)    
The IMR foreign fund cannot utilise a tax loss or net capital loss in relation to the income year, or in any future income year, to the extent the loss is attributable to pre-2012 IMR income, a pre-2012 IMR capital gain, a pre-2012 IMR deduction or a pre-2012 IMR capital loss.