ATO ID 2010/211: Section 99B: receipt of trust income not previously subject to tax
Date of decision: 17 November 2010
Year of income: Year ended 30 June 2010
Business line: Public Groups and International

Issue
For the purpose of paragraph 99B(2)(d) of the Income Tax Assessment Act 1936 (ITAA 1936), is an amount taken to be 'included in the assessable income of any taxpayer' under section 102AAZD of the ITAA 1936 even though the taxpayer has not included the amount in their income tax return?

Decision
Yes. The amount is taken to be included in the assessable income of the taxpayer under section 102AAZD of the ITAA 1936 even though the amount has not been included in the taxpayer's tax return for the purpose of paragraph 99B(2)(d) of the ITAA 1936.

Facts
A resident of Australia was appointed as a beneficiary of a non-resident discretionary trust and received a distribution from the trust in an income year. The trust had no net income as defined under section 95 of the ITAA 1936 for the current income year. The amount was distributed out of foreign source income derived by the non-resident trust in a prior year which was assessable to a transferor of the trust under section 102AAZD of the ITAA 1936 (section 102AAZD amount). The transferor did not return the section 102AAZD amount in their income tax return in the prior year. The Commissioner is out of time to amend. Sections 96B and 96C of the ITAA 1936 did not apply because there was no other beneficiary that had an interest in the non-resident trust at any time.

Reasons for decision
Summary: Subsection 99B(1) of the ITAA 1936 includes as assessable income of a beneficiary an amount paid to or applied for the benefit of the beneficiary of a trust estate. However, paragraph 99B(2)(d) of the ITAA 1936 excludes an amount 'that is or has been included in the assessable income of any taxpayer (other than a company) under section 102AAZD'. An amount is assessable under section 102AAZD of the ITAA 1936 even though it was not included in the income tax return of the transferor and the Commissioner is out of time to amend the taxpayer's assessment. The amount is therefore excluded from being assessed to the beneficiary under subsection 99B(1) of the ITAA 1936 by paragraph 99B(2)(d) of the ITAA 1936.

Legislative references: Income Tax Assessment Act 1936 section 95 section 96B section 96C section 97 subsection 99B(1) paragraph 99B(2)(d) section 102AAZD
Related ATO interpretative decisions: ATO ID 2008/155 | ATO ID 2008/156
Subject references: International tax Trusts Trust distributions Non resident trusts