ATO ID 2004/66: Assessability of payment of accumulated foreign-source income of a non resident trust to a resident taxpayer
Date of decision: 14 January 2004
Year of income: Year ended 30 June 2003
Business line: Public Groups and International

Issue
Is the resident taxpayer assessable on the payment of accumulated foreign-source income of a non-resident trust under section 99B of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision
Yes. The resident taxpayer is assessable on the payment of accumulated foreign-source income of a non-resident trust under section 99B of the ITAA 1936.

Facts
The taxpayer was a resident of Australia during the year of income. The taxpayer was presently entitled to a share of the foreign-source income of the non-resident trust prior to becoming a resident of Australia. This income was accumulated in the trust and the taxpayer was subsequently paid several amounts from this accumulation after the taxpayer became a resident of Australia. These amounts had not previously been subject to tax in Australia. These amounts are amounts that would be included in assessable income of a resident taxpayer if they were derived by that resident taxpayer. Subsection 99B(1) of the ITAA 1936 provides that where, during a year of income, a beneficiary who was a resident at any time during the year is paid a distribution from a trust, or has an amount of trust property applied for their benefit, that amount is to be included in the assessable income of the beneficiary. Subsection 99B(2) of the ITAA 1936 modifies the rule in subsection 99B(1) and has the effect that the amount to be included in assessable income under subsection (1) is not to include any amount that represents either:- The amounts paid to the resident taxpayer beneficiary represent trust income of a class which is taxable in Australia, but which has not previously been subject to Australian tax in the hands of either the beneficiary or the trustee. None of the exclusions in subsection 99B(2) apply. Therefore, the amounts are assessable to the beneficiary under subsection 99B of the ITAA 1936.

Reasons for decision

Legislative references: Income Tax Assessment Act 1936 section 99B subsection 99B(1) subsection 99B(2) section 97 section 98 section 99 section 99A
Case references: Traknew Holdings Pty Ltd v. Federal Commissioner of Taxation (1991) 21 ATR 1478 91 ATC 4272
Related public rulings and determinations: Taxation Ruling TR 96/12 | Taxation Ruling TR 2003/9 | Taxation Ruling TR 2003/6
Other references: Explanatory Memorandum to Income Tax Assessment Amendment Bill (No. 5) 1978
Subject references: Residence in Australia Non residents trust Trust distributions