Private ruling: Assessability of trust distribution
Published: November 2014
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017.
Date scheme commenced: 1 July 2014.

Ruling: Q1: Will the distribution from a Company as Trustee for the Trust that relates to the sale of a property be included in your assessable income after taking account of applicable discounts, reductions and exemptions available to you and/or the trust? | A1: No.

Relevant facts and circumstances: You are over the age of 55 years as at 1 July 2015. Your retirement exemption limit is $500,000. You are a beneficiary of the Trust. You will receive a distribution from a Company as trustee for the Trust as a result of the sale of a property that was acquired by the Trust after 19 September 1985. The trust will distribute 50% of this amount to you and 50% to your spouse. You have advised that the trust's net capital gain will be $NIL, calculated in accordance with the method statement in section 102-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as follows: • applying the 50% discount by under step 3, and then • applying the relevant small business concessions under step 4.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 subdivision 115-C | Income Tax Assessment Act 1997 subdivision 152-C | Income Tax Assessment Act 1997 subdivision 152-D

Reasons for decision: Summary: As a presently entitled beneficiary, distributions of trust capital gains are treated as capital gains that you have made. If the trust has made a net capital gain, there are rules about how beneficiaries should treat this distribution for the purposes of calculating their own net capital gains. These rules are covered in subdivision 115-C of the Income Tax Assessment Act 1997 (ITAA 1997) and include the 'grossing up' of any 'net capital gains' of the trust that have been reduced by the CGT discount and/or the small business 50% reduction. 'Net capital gain' has the meaning given in section 102-5 of the ITAA 1997 (subsection 995-1(1)). Step 5 of the method statement in section 102-5 states: 'Add up the amounts of capital gains (if any) remaining after step 4. The sum is your net capital gain'. The term 'if any' as used in section 102-5 excludes any amounts that are $0 or less from the calculation of a 'net capital gain'. In your case, you will receive a distribution from the Trust following the trust's sale of a property. The trust's net capital gain calculated in accordance with the method statement in section 102-5(1) of the ITAA 1997 is $Nil. Therefore, subdivision 115-C will not apply (section 115-210(1)) and you will not be required to include the trust distribution that relates to the sale of the property in your assessable income.