Private ruling: Family trust distribution tax
Date of advice: 18 September 2025
Published: 17 November 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will family trust distribution tax (FTDT) be payable by the trustee for the Trust on the proposed distribution to Eligible Tier-1 Company (ET-1 Co) under section 271-15 of Schedule 2F of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No

Relevant facts and circumstances: 1. The Trust is a discretionary investment trust. 2. The corporate trustee for the Trust has a sole director (the Individual). 3. The Trust made a family trust election (FTE) pursuant to section 272-80 of the ITAA 1936 commencing in 20XX, with the Individual as the primary individual. The FTE remains in force as at the date of this ruling and is expected to remain in force at the time of a proposed distribution in the 20XX income year. 4. The proposed distribution will be made to ET-1 Co who is not currently a beneficiary of the Trust under its Trust Deed. The Trust will resolve to make it a beneficiary in the future if the proposed distribution is to go ahead. 5. The sole director of ET-1 Co is the Individual. 6. ET-1 Co has not made an interposed entity election (IEE). 7. ET-1 Co is an eligible tier-1 company (ET-1) within a Multiple Entry Consolidated Group (MEC Group), of which the Individual is the sole director of the head company. 8. ET-1 companies within the MEC Group are wholly and beneficially owned by Company 1. Company 1 is a foreign incorporated company. 9. Company 1 is wholly and beneficially owned by Company 2. Company 2 is a foreign incorporated company. 10. Company 2 is wholly and beneficially owned by Trust 2. Trust 2 is an Australian resident discretionary investment trust. The sole director of the corporate trustee of Trust 2 is the Individual. Trust 2 has made an FTE with the Individual as the primary individual.

Relevant legislative provisions: Family Trust Distribution Tax (Primary Liability) Act 1998 | Income Tax Assessment Act 1936 Division 271 | Income Tax Assessment Act 1936 section 271-15 | Income Tax Assessment Act 1936 subsection 271-15(1) | Income Tax Assessment Act 1936 section 272-10 | Income Tax Assessment Act 1936 section 272-20 | Income Tax Assessment Act 1936 section 272-80 | Income Tax Assessment Act 1936 section 272-90 | Income Tax Assessment Act 1936 subsection 272-90(1) | Income Tax Assessment Act 1936 subsection 272-90(5)

Reasons for decision: Summary: ET-1 Co will be a member of the Individual's family group in relation to the proposed distribution. Consequently, the requirements in subsection 271-15(1) have not been met and the trustee for the Trust will not have a liability to pay FTDT. | Detailed Reasoning - Detailed Reasoning: 1. FTDT is imposed by the Family Trust Distribution Tax (Primary Liability) Act 1998 at the top marginal rate plus medicare levy. Division 271 sets out the circumstances in which FTDT is payable. FTDT is payable where a trustee of a family trust has made an FTE and the trust distributes income or capital to a person outside the family group. [1] 2. Section 272-90 states whether a person is a member of the family group of the individual (the primary individual ) specified in the FTE in relation to a conferral of a present entitlement to, or a distribution of, income or capital of a company, partnership or trust, upon or to the person [2] . 3. The Trust made an FTE with the Individual as the primary individual. It is proposing to make a distribution to ET-1 Co. Therefore, if ET-1 Co is outside the family group of the Individual, the trustee for the theTrust will be required to pay FTDT. 4. Relevantly, subsection 272-90(5) states: A company, partnership or trust is a member of the primary individual's family group in relation to the conferral or distribution if, when the conferral takes place, or the distribution is made: (a) the primary individual; or (b) one or more members of the primary individual's family; or (c) 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 any combination of the above, have fixed entitlements directly or indirectly , and for their own benefit, to all of the income and capital of the company, partnership or trust. (Emphasis added) 5. In relation to the above provision, the company is ET-1 Co, the family trust is Trust 2 and the primary individual is the Individual. ET-1 Co will be a member of the Individual's family group if: (a) the trustees of Trust 2 have specified the Individual as the primary individual in an FTE, and (b) Trust 2 has fixed entitlements directly or indirectly, and for their own benefit, to all of the income and capital of ET-1 Co (together with the Individual and other members of the family group). 6. The trustee of Trust 2 has made an FTE with the Individual as the primary individual, satisfying (a) above. It must therefore be determined whether Trust 2 satisfies (b) by having fixed entitlements directly or indirectly, and for their own benefit, to all of the income and capital of ET-1 Co. 7. Trust 2 does not hold shares in ET-1 Co directly. Trust 2 wholly and beneficially owns Company 2, who wholly and beneficially owns Company 1, who wholly and beneficially owns ET-1 Co. Its interest in ET-1 Co is therefore not directly owned but indirectly owned. 8. Under section 272-20,a person will be taken to have a fixed entitlement to the income or capital of a company, partnership or trust if the person is indirectly entitled to the income or capital through fixed entitlements in a chain of one or more interposed entities. 9. Under section 272-10, a person will have fixed entitlements to a share of the income of a company, or of the capital of a company, if the person is the beneficial owner of shares 'carrying the right to receive some or all of the dividends' that might be declared by the company, or 'carrying the right to participate in a return of capital'. The extent of the entitlement to income or capital, as appropriate, is expressed as a percentage of total dividends that might be declared, or capital that might be returned. 10. Since the trustee for Trust 2 wholly owns Company 2, who wholly owns Company 1, who wholly owns 11. ET-1 Co, their respective entitlements are fixed at 100%. This results in Trust 2 indirectly having a fixed entitlement to all of the income and capital of ET-1 Co, therefore satisfying the above requirements. 12. As Trust 2 has specified the Individual as the primary individual in an FTE and has indirect fixed entitlements to all of the income or capital of ET-1 Co, ET-1 Co will be a member of the Individual's family group in relation to the proposed distribution under subsection 272-90(5). Therefore, the requirements in subsection 271-15(1) have not been met and the trustee of the Trust will not be liable to pay FTDT. [1] Subsection 271-15(1) [2] Subsection 272-90(1)

Reasons for decision: All legislative references are to Schedule 2F to the ITAA 1936 unless otherwise stated. | Question: Will family trust distribution tax (FTDT) be payable by the trustee for the Trust on the proposed distribution to ET-1 Co under section 271-15?