INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART VI - COLLECTION AND RECOVERY OF TAX  

Division 3 - Provisional tax  

Subdivision B - Provisional tax avoidance schemes  

SECTION 221YHAAD   PROVISIONAL TAX AVOIDANCE SCHEMES RELATING TO TRUSTEES LIABLE TO BE ASSESSED UNDER SECTION 98  

221YHAAD(1)   [Estimated taxable income increased by provisional tax benefit]  

Subject to subsection (3), where:

(a) a taxpayer in the capacity of a trustee of a trust estate who is liable to be assessed under section 98 in respect of a share of the net income of the trust estate of a year of income (in this subsection referred to as the ``current year of income'' ) to which a beneficiary is presently entitled furnishes a statement under subsection 221YDA(1) setting out the estimated taxable income of the taxpayer;

(b) the Commissioner is satisfied that the trust estate is, or might reasonably be expected to be, a family trust in relation to the beneficiary in relation to the current year of income; and

(c) the Commissioner serves on the taxpayer a notice in writing stating that the Commissioner is of the opinion that:

(i) the taxpayer has obtained or, but for this subsection, would obtain, a provisional tax benefit, of an amount specified in the notice, in connection with an arrangement in respect of the trust estate in relation to the current year of income in relation to the beneficiary, being an arrangement entered into or carried out before or after the commencement of this section; and

(ii) having regard to:

(A) the manner in which the arrangement was entered into or carried out;

(B) the form and substance of the arrangement;

(C) the time at which the arrangement was entered into and the length of the period during which the arrangement was carried out;

(D) the result in relation to the operation of this Division that, but for this subsection, would be achieved by the arrangement;

(E) any change in the financial position of the taxpayer that has resulted, will result, or may reasonably be expected to result, from the arrangement;

(F) any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the taxpayer, being a change that has resulted, will result, or may reasonably be expected to result, from the arrangement;

(G) any other consequence for the taxpayer, or for any person referred to in sub-subparagraph (F), of the arrangement having been entered into or carried out; and

(H) the nature of any connection (whether of a business, family or other nature) between the taxpayer and any person referred to in sub-subparagraph (F),

it would be concluded that the person, or one of the persons, who entered into or carried out the arrangement or any part of the arrangement did so for the purpose of enabling the taxpayer to obtain a provisional tax benefit in connection with the arrangement or of enabling the taxpayer and another taxpayer or other taxpayers each to obtain a provisional tax benefit in connection with the arrangement (whether or not that person who entered into or carried out the arrangement or any part of the arrangement is the taxpayer or is the other taxpayer or one of the other taxpayers),

the estimated taxable income of the taxpayer of the current year of income shall be deemed to have been increased by the amount of the provisional tax benefit specified in the notice.

221YHAAD(2)   [Amount of provisional tax benefit obtained]  

A reference in subsection (1) to the obtaining by a taxpayer of a provisional tax benefit in connection with an arrangement in respect of a trust estate (in this subsection referred to as the ``scheme trust estate'' ) in relation to a year of income (in this subsection referred to as the ``current year of income'' ) in relation to a beneficiary is a reference to all of the following paragraphs being satisfied:

(a) an amount not being assessable under section 98 to the taxpayer in the current year of income in respect of a share of the beneficiary of the net income of the scheme trust estate where that amount would have been so assessable or might reasonably be expected to have been so assessable to the taxpayer in the current year of income if the arrangement had not been entered into or carried out;

(b) either or both of the following subparagraphs applying:

(i) another amount, or other amounts, being assessable, or being reasonably likely to be assessable, to the taxpayer or another taxpayer under section 98 in any other year or years of income (including a year of income ending before the commencement of this section) in respect of a share of the beneficiary of the net income of a trust estate that is a family trust of the beneficiary in relation to that other year or other years of income where that amount or those amounts would not have been so assessable, or might reasonably be expected not to have been so assessable, in that other year of income or those other years of income if the arrangement had not been entered into or carried out;

(ii) another amount, or other amounts, being included, or being reasonably likely to be included, under subsection 92(1) or section 97 , 98A or 100 , in the assessable income of the beneficiary of any other year or years of income (including a year of income ending before the commencement of this section) in respect of the net income of a partnership or trust estate that is a family partnership or family trust, as the case may be, of the beneficiary in relation to that other year or other years of income, where that amount or those amounts would not have been so included, or might reasonably be expected not to have been so included, in the assessable income of the beneficiary of that other year of income or those other years of income if the arrangement had not been entered into or carried out;

(c) either of the following subparagraphs applying:

(i) provisional tax not being payable by the taxpayer in respect of the current year of income where that provisional tax would have been, or might reasonably be expected to have been, payable by the taxpayer if the arrangement had not been entered into or carried out;

(ii) the amount of provisional tax payable by the taxpayer in respect of the current year of income being less than the amount that would have been, or might reasonably be expected to have been, payable by the taxpayer if the arrangement had not been entered into or carried out,

and, for the purposes of subsection (1), the amount of the provisional tax benefit shall be taken to be:

(d) in a case to which paragraph (e) does not apply - the amount referred to in paragraph (a); or

(e) where:

(i) the scheme trust estate was a family trust of the beneficiary in relation to the last preceding year of income; and

(ii) a taxpayer in the capacity of a trustee of the scheme trust estate was liable to be assessed under section 98 in respect of the beneficiary's share of the net income of the scheme trust estate of the last preceding year of income,

whichever of the following amounts is the greater:

(iii) the amount calculated in accordance with the formula

UA   +   B,

where:

U is the provisional tax uplift multiplier for the current year of income; and

A is the amount that was so assessable in respect of that share; and

B is the amount of the estimated taxable income of the taxpayer for the current year of income;

(iv) the amount referred to in paragraph (a).

221YHAAD(2A)   [Provisional tax instalments]  

A reference in paragraph (2)(c) to provisional tax includes a reference to instalments of provisional tax.

221YHAAD(3)   [Limits on increase in estimated taxable income]  

The amount of the estimated taxable income of a taxpayer of a year of income shall not be increased, by virtue of an application, or applications, of subsection (1), to an amount that would, by virtue of subsection 221YDA(2) or (4) , result in the amount of provisional tax payable by the taxpayer in respect of the year of income exceeding the amount that would, but for section 221YDA , be the amount of provisional tax payable by the taxpayer in respect of the year of income.

221YHAAD(3A)   [Reference to provisional tax payable]  

A reference in subsection (3) to an amount of provisional tax payable by a taxpayer in respect of a year of income includes a reference to an amount that, but for subsection 221YBA(5) , would be the provisional tax payable by the taxpayer in respect of the year of income.

221YHAAD(4)   [Increase attributable to income of particular kind]  

For the purposes of this Division, the Commissioner may treat an amount by which the estimated taxable income of a taxpayer is increased by virtue of an application, or applications, of subsection (1) as being attributable to income of a particular kind to such extent as the Commissioner considers reasonable.

221YHAAD(5)   [Inclusion of trust estate income in estimated taxable income]  

A reference in this section to the estimated taxable income of a taxpayer who is liable to be assessed under section 98 in respect of a share of the net income of a trust estate shall be read as a reference to that share.