Private ruling: Family trust election and family trust distribution tax
Date of advice: 27 November 2020
Published: January 2021
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Were the trustees of the Trust eligible to make a family trust election in the income year ending 30 June 2021 under subsection 272-80(1) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) nominating Person X as the test individual and the year ended 30 June 20XX as the specified income year? | A1: Yes | Q2: Were the trustees of the Trust liable to pay family trust distribution tax (FTDT) under Division 271 of Schedule 2F to the ITAA 1936 in respect of the Trust's conferral of the present entitlement to income or capital to Persons A and B in the year ended 30 June 20XX? | A2: No | Q3: If Person W marries or enters a de facto relationship in the income year ending 30 June 20XX, will the trustees of the Trust be liable to pay FTDT under Division 271 of Schedule 2F to the ITAA 1936 if the Trust confers a present entitlement to, or distributes income or capital to, either Person A or B in the income year ending 30 June 20XX and subsequent years? | A3: Yes | Q4: If Person W marries or enters a de facto relationship in the income year ending 30 June 20XX, will the trustees of the Trust be liable to pay FTDT under Division 271 of Schedule 2F to the ITAA 1936 if the Trust confers a present entitlement to, or distributes income or capital to, Person D in the income year ended 30 June 20XX and subsequent income years? | A4: No

Relevant facts and circumstances: Person R was the spouse of Person W. Person R had a natural child, Person X, from a previous relationship. Person W had a natural child, Person D from a previous relationship. Persons A and B are the natural Children of Person D, so are the grandchildren of Person W. Person R was the spouse of Person W at the time Person R died. Persons A and B are beneficiaries of the Trust which was established under the Will of Person R. Persons X and D are the joint Trustees of the Trust. The Trust is a non-fixed trust for the purpose of section 272-70 of Schedule 2F to the ITAA 1936. The Trustees of the Trust made a determination for the year ended 30 June 2020 that each of the specified beneficiaries were presently entitled to an amount of the income of the trust. No distributions of income or capital of the Trust were made during the year ended 30 June 2019. The Trustees have made a family trust election (the Election) in the approved form in accordance with section 272-80 of Schedule 2F to the ITAA 1936, nominating Person X as the test individual and the year ended 30 June 2019 as the specified income year. Assumptions The distribution test in paragraph 272-80(4A)(b) of Schedule 2F to the ITAA 1936 will be satisfied. That is, any conferral of present entitlement to income or capital of the Trust made by the trustees during the relevant period has been made on, or any distributions of income or capital of the Trust made by the trustees during that period, have been made to, Person X or members of Person X's family group.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1936 Division 271 of Schedule 2F | Income Tax Assessment Act 1936 section 271-15 of Schedule F | Income Tax Assessment Act 1936 sub section 271-15(1) of Schedule F | Income Tax Assessment Act 1936 section 272-70 of Schedule 2F | Income Tax Assessment Act 1936 section 272-80 of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-80(1) of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-80(4) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-80(4A)(a) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-80(4A)(b) of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-87(1) of Schedule 2F | Income Tax Assessment Act 1936 subparagraph 272-87(1)(a)(i) of Schedule 2F | Income Tax Assessment Act 1936 subparagraph 272-87(1)(a)(iii) of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-87(2) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-87(2)(b) of Schedule 2F | Income Tax Assessment Act 1936 section 272-90 of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-90(2A) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-90(2A)(a) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-90(2A)(b) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-90(2A)(c) of Schedule 2F | Income Tax Assessment Act 1936 section 272-95 of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-95(1) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-95(1)(a) of Schedule 2F | Income Tax Assessment Act 1936 paragraph 272-95(1)(b) of Schedule 2F | Income Tax Assessment Act 1936 subsection 272-95(2) of Schedule 2F | Income Tax Assessment Act 1936 section 272-140 of Schedule 2F | Income Tax Assessment Act 1997 subsection 960-252(1) | Income Tax Assessment Act 1997 section 960-255 | Income Tax Assessment Act 1997 subsection 960-255(2) | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: All legislative references are to Schedule 2F to the ITAA 1936 unless otherwise indicated. | Detailed Reasoning - Legislative background - family before Person R's death: Subsection 272-95(1) states: The family of an individual (the test individual ) consists of the test individual and all of the following (if applicable): (a) any parent, grandparent, brother or sister of the test individual or the test individual's spouse; (b) any nephew, niece or child of the test individual or the test individual's spouse; (c) any lineal descendant of a nephew, niece or child referred to in paragraph (b); (d the spouse of the test individual or of anyone who is a member of the test individual's family because of paragraphs (a), (b) and (c). Note 1 to this subsection states that a child, parent and spouse are defined in subsection 6(1) of the ITAA 1936, which takes the definition under section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) being: child , in relation to a person, includes: (a) an adopted child, a stepchild or an ex-nuptial child of the person; and (b) a child of the person's spouse; and (c) someone who is a child of the person within the meaning of the Family Law Act 1975 . parent : an individual is the parent of anyone who is the individual's *child. spouse of an individual includes: (a) another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a *State law or *Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and (b) another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. Person X is the test individual and each individual's relationship to Person X must be tested to determine if they are family of Person X. | Detailed Reasoning - Person X and Person W: Person X, until the date of Person R's death, was Person R's spouse. Person R was Person X's biological father. In applying the relevant definitions of child and parent, as Person W was the spouse of Person R, Person W was a parent of Person X and Person X was a child of Person W. As such, Person W was family of Person X for the purposes of the definition in paragraph 272-95(1)(a), because Person W was a parent of Person X, as the term 'parent' is defined in subsection 995-1. | Detailed Reasoning - Person X and Person D: Person D is a natural child of Person W. Note 2 to subsection 272-95(1) states that section 960-255 of the ITAA 1997 may be relevant to determining relationships for the purposes of paragraph (1)(a)' and subsection 960-255(2) of the ITAA 1997 states: If one individual is the *child of another individual because of the definition of child in subsection 995-1(1), relationships traced to, from or through the individual, and family groups of which either individual is a member, are to be determined in the same way as if the individual were the natural child of the other individual. The effect of subsection 960-255 is that Person X is treated as a natural child of Person W. At the same time, Person D is treated as a natural child of Person R. Therefore, under section 960-255 Person D and Person X are treated as brothers or sisters (i.e. both being a natural child of either Person W or Person R). Paragraph 272-95(1)(a) includes a brother or sister of the test individual. In considering the application of subsection 272-95(1), and with reference to Note 2 to that subsection, as section 960-255 considers Person D and Person X to be brothers or sisters, paragraph 272-95(1)(a) also applies as if Person D and Person X were brothers. As such, Person D is a brother of Person X, through the application of section 960-255 and paragraph 272-95(1)(a), and thus is family of Person X for the purposes of the definition of family is section 272-95. | Detailed Reasoning - Person X and Person A and Person B: As explained above, by the operation of section 960-255 paragraph 272-95(1)(a) applies to treat Person D as a brother of Person X. The example in subsection 960-225(2) states: Clare's stepfather Frank has a sister Angela. This Act applies as if Angela were Clare's aunt because Clare is defined to be Frank's child. That is, Clare's relationship to Angela is determined on the basis that Clare is Frank's natural child. Person A and Person B are the children of Person D and the grandchildren of Person W. As subsection 960-255(2) and paragraph 272-95(1)(a) operate to treat Person X and Person D as brothers, the flow on effect is that Person A and Person B are treated as nephews or nieces of Person X. A nephew or niece of the test individual is family of that test individual under paragraph 272-95(1)(b). Accordingly, Person A and Person B are family of Person X through the application of paragraph 272-95(1)(b). | Detailed Reasoning - Person R's death: Subsection 272-95(2) states: A person does not cease to be a family member merely because of the death of any other family member The word 'merely' is not defined in either the ITAA 1997 or the ITAA 1936, so takes on its ordinary dictionary meaning. The Macquarie Dictionary online defines 'merely' as [1]: only as specified, and nothing more; simply Subsection 272-95(2) thus ensures that a person's death does not stop another person from being a family member. If Person R's death is the only additional factor that impacts the relationship between Person X and Persons W, D, A and B, then paragraph 272-95(1)(a) in respect of Persons W and D, and paragraph 272-95(1)(b) in respect of Persons A and B, will continue to apply as it did before Person R's death. As such, until such time as other factors are introduced, Persons W, D, A and B remain family of Person X. Person W marries or takes a new spouse Subsection 272-90(2A) allows for certain former family members to remain members of the primary individual's family group. This subsection states: The following persons are members of the primary individual's family group in relation to the conferral or distribution: (a) a person who was a spouse of either the primary individual or of a member of the primary individual's family before a breakdown in the marriage or relationship; and (b) a person: (i) who was the spouse of either the primary individual or of a member of the primary individual's family immediately before the death of the primary individual or member of the primary individual's family; and (ii) who is now the spouse of a person who is not a member of the primary individual's family; and (c) a person who was a child of the spouse of either the primary individual or of a member of the primary individual's family before a breakdown in the marriage or relationship of the primary individual or the member of the primary individual's family. Note: The fact that a person is a member of the family group of an individual under this subsection does not mean that the person is a member of the individual's family under section 272-95. Subsection 272-95(2) and subsection 272-90(2A) were both inserted at the same time and sections 272-95 and 272-90 contain notes that reference each other. In addition to the note at the end of subsection 272-90(2A), quoted directly above, the note to section 272-95 states: A person who is no longer a member of an individual's family under this section may still be a member of the individual's family group under subsection 272-90(2A) Thus, sections 272-90 and 272-95 should to be read together to correctly determine where an individual is a member of the family group. Relevant to the interaction between sections 272-90 and 272-95, the definition of 'breakdown in the marriage or relationship' in section 272-140 states: breakdown in the marriage or relationship of an individual: this occurs if the individual is living with another individual on a genuine domestic basis in a relationship as a couple (whether the individuals are the same sex or different sexes and whether legally married or not) and ceases to do so. When Person R died, they ceased to live with Person W on a genuine domestic basis and accordingly there is a breakdown in the relationship at that time. If we then apply this definition to paragraph 272-90(2A)(a), the conditions set down in that paragraph would also be met at the time of Person R's death. However, the definition of 'breakdown in the marriage or relationship' and the conditions of paragraph 272-90(2A)(a) are satisfied only because Person R died. Subsection 272-95(2) operates to exclude mere death from affecting the application of section 272-95, so there is not a 'breakdown in the marriage or relationship' at the time of death for the purpose of applying paragraph 272-90(2A)(a). By contrast, paragraph 272-90(2A)(b) applies when a surviving spouse takes a new spouse. The taking of a new spouse is a factor beyond mere death, and in these circumstances subsection 272-95(2) does not affect the application of paragraph 272-90(2A)(b). If at some point after Person R's death Person W marries or takes a new spouse, paragraph 272-90(2A)(b) is enlivened and subsection 272-95(2) will not affect the application of the other subsections of sections 272-95 or section 272-90. In addition, subsection 272-95(2) does not affect how the application of section 960-255, or of the definitions of 'child', 'parent', and 'spouse' in subsection 6(1) on the death of a spouse. In the given circumstances, it only operates such that the death of Person R does not preclude paragraph 272-95(1)(a) applying to the relationship between Persons W and X, and by extension, Persons D, A and B. If Person W takes a new spouse, section 960-255 will then apply to that new relationship, as it only applies to the '2 people who are an unmarried couple', as referred to in subsection 960-252(1), and their children. The flow on effect is that Person D is treated as a natural child of Person W's new spouse (and the children of Person W new spouse, if any, are now treated as natural children of Person W). The impact for FTDT purposes upon Person X's relationships to Persons D, A and B of Person W taking a new spouse is discussed below in considering questions 3 and 4. | Detailed Reasoning - Question 1: Were the trustees of the Trust eligible to make a family trust election in the income year ending 30 June 2021 under subsection 272-80(1) nominating Person X as the test individual and the year ended 30 June 20XX as the specified income year? | Summary: Yes, as the two trustees, Person X and Person D, control the Trust, and Person D is 'family' of Person X (the primary individual), the trustees were eligible to make the family trust election. | Detailed Reasoning - Detailed reasoning: In order to be eligible to make a family trust election under subsection 272-80(1), subsection 272-80(4) requires that the Trust passes the family control test set down in section 272-87. The Trustees have made the election, in relation to the Trust, in the income year ending 30 June 20XX, nominating the year ended 30 June 20XX as the specified income year. In relation to the requirements for making the family trust election, subsection 272-80(4A) states: The specified income year may be a year before the one in which the election is made if: (a) at all times in the period from the beginning of the specified income year until 30 June in the income year before the one during which the election is made, the trust passes the family control test (see section 272-87); and (b) either: (i) any conferrals of present entitlement to income or capital of the trust made by the trustee during that period have been made on; or (ii) any distributions of income or capital of the trust made by the trustee during that period have been made to; the individual specified in the election or members of that individual's family group. The assumption of this ruling is that paragraph 272-80(4A)(b) will be met in relation to the Trust, and thus the Commissioner need only consider whether the requirements of paragraph 272 80(4A)(a) are satisfied. Subsections 272-87(1) and (2) state: (1) A trust in respect of which a family trust election or an interposed entity election is proposed to be made passes the family control test if: (a) the requirement in any of the paragraphs of subsection (2) is satisfied in relation to a group consisting of: (i) the individual (the primary individual ) who is to be specified in the family trust election or, in the case of an interposed entity election, who is specified in the family trust election to which the interposed entity election will relate; or (ii) one or more members of the primary individual's family (see section 272-95); or (iii) the primary individual and one or more members of the primary individual's family; or (b) the requirement in any of paragraphs (a) to (e) of subsection (2) is satisfied in relation to a group consisting of a person or persons covered by subparagraph (a)(i), (ii) or (iii) of this subsection and one or more legal or financial advisers to the primary individual or to a member of the primary individual's family; or (c) the requirement in paragraph (f) of subsection (2) is satisfied in relation to a group consisting of: (i) the trustees of one or more family trusts, provided the primary individual is specified in the family trust election of each of those family trusts; or (ii) such trustees and a person or persons covered by subparagraph (a)(i), (ii) or (iii). (2) The requirement for the purposes of subsection (1) is that: (a) the group has the power, by means of the exercise of a power of appointment or revocation or otherwise, to obtain beneficial enjoyment (directly or indirectly) of the capital or income of the trust; or (b) the group is able (directly or indirectly) to control the application of the capital or income of the trust; or (c) the group is capable, under a scheme, of gaining the beneficial enjoyment in paragraph (a) or the control in paragraph (b); or (d) the trustee of the trust is accustomed, under an obligation or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the group; or (e) the group is able to remove or appoint the trustee of the trust; or (f) the group has more than a 50% stake in the income or capital of the trust; or (g) persons in the group are the only persons who, under the terms of the trust, can obtain the beneficial enjoyment of the income and capital of the trust As Person X and Person D have been appointed as joint trustees under the terms of Person R's Will, both Persons X and D must be 'family', as defined in subsection 272-95(1), for the Trust to satisfy the family control test. If we examine subsection 272-87(2) and subparagraph 272-87(1)(a)(i) together, there is no paragraph under subsection 272-87(2) that Person X can satisfy on their own. While Person D is 'family' of Person X under subsection 272-95(1), the condition set down in subparagraph 272-87(1)(a)(iii) is met as together Persons D and X control the Trust. Paragraph 272-87(2)(b) is also satisfied, as together Persons D and X control the application of both the capital and income of the Trust. The control of the Trust and the control of capital and income of the Trust by Persons X and D as family is impacted if Person W marries or takes a new spouse: At that time, Person D will no longer be 'family' of Person X under subsection 272-95(1). However, Person W did not marry or take a new spouse from the time of Person R's death up to and including 30 June 20XX. As such, the requirements of paragraph 272-80(4A)(a) are satisfied, and the trustees of the Trust were eligible to make a family trust election in the income year ending 30 June 20XX under subsection 272-80(1), nominating Person X as the test individual and the year ended 30 June 20XX as the specified income year. | Detailed Reasoning - Question 2: Are the trustees of the Trust liable to pay FTDT under Division 271 in respect of the Trust's conferral of the present entitlement to income or capital to both of Person D's children in the year ended 30 June 20XX? | Summary: No, Person A and Person B are part of the family group as they are 'family' of the primary individual, Person X, being treated as nephews or nieces of Person X by the operation of subsection 960-255(2). Accordingly, the trustees are not liable to pay FTDT in respect of the present entitlement conferred to Persons A and B in the income year ended 30 June 20XX. | Detailed Reasoning - Detailed reasoning: Section 271-15 renders the trustee liable for FTDT where a family trust makes a distribution outside of the family group. Subsection 271-15(1) states: This section applies if: (a) a trustee makes a family trust election in relation to a trust; and (b) at any time while the election is in force (including a time before it was made), the trust confers a present entitlement to, or distributes, income or capital of the trust: (i) upon or to a person who is neither the individual specified in the family trust election nor a member of the individual's family group in relation to the conferral or distribution; or (ii) upon or to the individual specified in the election or a member of the individual's family group, where the individual or member is the trustee of a trust, or the member is a trust, that is not included in the individual's family group in relation to the conferral or distribution. Paragraph 272-95(1)(b) includes a nephew or niece of the test individual, i.e. Person X's nephews and nieces. Prior to Person R's death, Person D's children, Person A and Person B, through the operation of subsection 960-255(2), were treated as nephews or nieces of Person X. Thus, the distribution to Person A and Person B is not outside of the family group, and the trustees of the Trust are not liable to pay FTDT if the Trust conferred a present entitlement to income or capital of the Trust to Persons A and/or B in the year ended 30 June 20XX. | Detailed Reasoning - Question 3: If Person W marries or enters into a de facto relationship in the income year ending 30 June 20XX, will the trustees of the Trust be liable to pay FTDT under Division 271 if the Trust confers a present entitlement to, or distributes, income or capital to one or more of Person D's children in the income year ending 30 June 20XX and subsequent years? | Summary: Yes, once Person W takes a new spouse, Person W is no longer treated as Person R's spouse, as subsection 272-95(2) no longer applies, and thus subsection 960-255(2) and paragraph 272-95(1)(a) no longer apply. As a result, Person X is no longer treated as a natural child of Person W, and Persons A and B are no longer being treated as Person X's nephews or nieces, and thus Persons W, A and B are no longer family in relation to Person X. Accordingly, the trustees are liable to pay FTDT on the amount or value of any conferral of present entitlement to, or distribution of, income or capital to Person D's children. | Detailed Reasoning - Detailed reasoning: Section 271-15 states: (1) This section applies if: (a) a trustee makes a family trust election in relation to a trust; and (b) at any time while the election is in force (including a time before it was made), the trust confers a present entitlement to, or distributes, income or capital of the trust: (i) upon or to a person who is neither the individual specified in the family trust election nor a member of the individual ' s family group in relation to the conferral or distribution; or (ii) upon or to the individual specified in the election or a member of the individual ' s family group, where the individual or member is the trustee of a trust, or the member is a trust, that is not included in the individual ' s family group in relation to the conferral or distribution. (2) If this section applies: (a) if the trustee is an individual - the trustee is liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital to which the entitlement relates, or that is distributed; or (b) if the trustee is a company - the trustee, together with each person who was a director of the company at the time of the conferral or distribution, is jointly and severally liable to pay tax, as imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 , on the amount or value of the income or capital to which the entitlement relates, or that is distributed Should Person W remarry or enter a de facto relationship at some time after 30 June 20XX, then at that time subsection 272-95(2) ceases to apply in respect of Person W's relationship with Person R that existed before Person R's death. Subsection 960-255(2) also ceases to apply to Person X's relationship with Person A and Person B, resulting in Persons A and B no longer being treated as nephews or nieces of Person X under paragraph 272-95(1)(b). When paragraph 272-95(1)(b) ceases to apply, consideration is required as to whether subsection 272-95(1) applies such that Persons A and B remain family of Person X. Upon consideration, there is no other category that renders Persons A and B family in relation to Person X. As such, Persons A and B are no longer family of Person X but, returning to the Note to section 272-95, consideration is required as to whether Person A and Person B are a part of the family group under subsection 272-90(2A) that can receive a benefit that would not attract FTDT, should they receive an entitlement from the Trust. Subsection 272-90(2A) only references spouses and children of a marriage or relationship, i.e. it does not include grandchildren (or children of the children) of a marriage or relationship. As such, Persons A and B are not in the class of former family members covered by subsection 272-90(2A) and any distribution to Person A or Person B would thus be outside of the family group. If Person W takes a new spouse, as Persons A and B are not members of the family group in relation to Person X, the trustees of the Trust, would be liable to pay FTDT if the Trust confers a present entitlement to, or distributes, income or capital of the Trust to Person A and/or Person B in the year ending 30 June 20XX and/or any subsequent income year. | Detailed Reasoning - Question 4: If Person W marries or enters a de facto relationship in the income year ending 30 June 2021, will the trustees of the Trust be liable to pay FTDT under Division 271 if the Trust confers a present entitlement to, or distributes, income or capital of the Trust to Person D in the income year ending 30 June 20XX and/or subsequent income years? | Summary: No, should Person W marry or enter a de facto relationship, Person D becomes a member of any family group that has Person X as the test individual through of the application of paragraph 272-90(2A)(c). Thus, the trustees will not be liable to pay FTDT on any present entitlement they confer a present entitlement to, or distributes, income or capital of the Trust to Person D. | Detailed Reasoning - Detailed reasoning: Should Person W remarry or enter a de facto relationship at some time after 30 June 2020, subsection 272-95(2) ceases to apply in respect of the spousal relationship that existed before Person R's death. Subsection 960-255(2) thus ceases to apply both before and immediately after Person R's death, and accordingly, subsection 960-255(2) and paragraph 272-95(1)(a) will no longer apply to treat Person D as a brother or sister of Person X. As paragraph 272-95(1)(a) will cease to apply, consideration is to be given to whether subsection 272-95(1) will apply such that Person D remains family of Person X. Upon consideration there is no other category that will render Person D family of Person X. As such Person D will no longer be family in relation to Person X but, unlike Persona A and B, Person D was a child of the spouse of a member of Person X's family before Person R's death as Person D is a child of Person W, who was in a relationship with Person R, the test individual's father. The definition of a 'breakdown in the marriage or relationship' as defined in section 272-140 is satisfied at the time of Person R's death. As a result, Person D will be a family member through the application of subsection 272-90(2A), which will be enlivened when subsection 272-95(2) ceases to apply on Person W taking a new spouse. This approach is confirmed by example 8.5 in the explanatory memorandum to the Tax Laws Amendment (2007 Measures No. 4) Bill 2007 (Original EM), which introduced both subsection 272-95(2) and paragraph 272-90(2A)(c): The trustee of the Vu Trust has made a family trust election pursuant to section 272-80 and has specified Harry as the test individual. Harry's spouse, Athena has a child, Jasmine, from a previous relationship, Harry's step-child. Since making the family trust election, Athena has died. Harry has not formally adopted Jasmine under any state or territory adoption law. Jasmine remains a step-child of Harry even after the death of Athena. However, she will cease to be a step-child at the time Harry remarries or enters into a de facto relationship. Nonetheless, Jasmine will remain a member of Harry's family group in respect of the Vu Trust, because she will be a former step-child under subsection 272-90(2A). Therefore, any distributions to Jasmine will not be subject to family trust distribution tax. If instead Harry and Athena had divorced, Jasmine would become a former step-child, and while not a family member, would remain a member of the family group. Accordingly, any distribution to Jasmine would not be subject to family trust distribution tax. Under the above example, subsection 272-95(2) operates such that the mere death of Athena does not result in Jasmine ceasing to be a step-child of Harry for the purposes of subsection 272-95(1). In applying subsection 272-95(1), Jasmine only ceased to be Harry's step-child when Harry took a new spouse. In this example, the use of the word 'step-child' is significant because when paragraph 272-90(2A)(c) was inserted it stated: a person who was a step-child of either the primary individual or of a member of the primary individual's family before a breakdown in the marriage of the primary individual or the member of the primary individual's family The amendments made as a result of the Same-Sex Relationships (Equal Treatment in Commonwealth Laws-General Law Reform) Act 2008 broadened paragraph 272-90(2A)(c) to ensure it applied all children of a spouse and other relationships other than marriage in the same way as it applied to children of a traditional marriage. Thus, should Person W take a new spouse, a distribution to Person D [2] will not be outside of the family group, and the trustees of the Trust will not be liable to pay FTDT if the Trust confers a present entitlement to, or distributes, income or capital to Person D. [1] https://www.macquariedictionary.com.au/features/word/search/?search_word_type=Dictionary & word=merely {2] The Commissioner makes no comment as to whether the terms of the Will allow Person D or any other person to benefit from the Trust.