Law Administration Practice Statement PS LA 2002/11
Escalation of issues concerning fixed entitlements to a share of the income or capital of a trust
Date of issue: 9 May 2002
Date of effect: 19 September 2001
Draft: False
Withdrawn: False

1. What this Practice Statement is about: Among other things, the rules contained in Schedule 2F of the Income Tax Assessment Act 1936 (ITAA 1936): • establish when a beneficiary has a fixed entitlement to a share of the income or capital of a trust (and thus when the trust is a fixed trust), and • provide that the Commissioner of Taxation may exercise a discretion to deem that a person has a fixed entitlement. • establish when a beneficiary has a fixed entitlement to a share of the income or capital of a trust (and thus when the trust is a fixed trust), and • provide that the Commissioner of Taxation may exercise a discretion to deem that a person has a fixed entitlement. The concepts of 'fixed entitlement' and 'fixed trust' are also incorporated in other areas of the tax legislation. These concepts must be interpreted and applied consistently. This Practice Statement therefore outlines when requests for advice should be escalated to the Trust Technical Network for consideration. | 2. Requests for advice that must be escalated to the Trust Technical Network: You must escalate any requests for advice that concern: • persons having fixed entitlements to income or capital of a trust under subsection 272-5(1) of Schedule 2F to the ITAA 1936, or • the exercise of the discretion to deem a fixed entitlement under subsection 272-5(3) of Schedule 2F to the ITAA 1936. • persons having fixed entitlements to income or capital of a trust under subsection 272-5(1) of Schedule 2F to the ITAA 1936, or • the exercise of the discretion to deem a fixed entitlement under subsection 272-5(3) of Schedule 2F to the ITAA 1936. You must also escalate any requests for advice in relation to the legislative sections outlined in the Attachment to this Practice Statement, where that request requires consideration of the terms 'fixed entitlement' and 'fixed trust'. | 3. More information: To find out more, contact the Trust Technical Network . Table 1: Income Tax Assessment Act 1936 Provision Contends with Schedule 2F Trust loss provisions Section 102UC Trustee beneficiary reporting Sections 160APA and 160APHD Franking of dividends Table 2: Income Tax Assessment Act 1997 Provision Contends with Section 104-72 Capital gains tax event E4 and trusts Section 115-50 Discount capital gains Section 115-110 Foreign or temporary residents - individuals with trust gains Section 116-35 Capital proceeds - market value substitution rule Section 118-510 Capital gains tax and venture capital Section 124-781 Capital gains tax and scrip-for-scrip rollover Subdivision 165-F Company tax losses - ownership of a company by non-fixed trusts Section 170-265 Company as a member of a linked group Section 207-128 Franked distributions - reinvestment choice Section 415-20 Designated infrastructure entity Section 703-40 Consolidation: treating entities held through non-fixed trusts as wholly owned subsidiaries Section 707-325 Consolidation: modified market value of an entity becoming a member of a consolidated group Section 713-50 Consolidation: determining destination of distribution by non-fixed trust Section 719-35 Consolidation: treating entities held through non-fixed trusts as wholly owned subsidiaries Section 725-65 Direct value shifting: cause of the value shift Section 727-110 Indirect value shifting: common ownership nexus test Sections 727-360, 727-365, 727-400 and 727-410 Indirect value shifting: control, common ownership and ultimate stake tests Section 855-40 Capital gains or losses of foreign residents Table 3: A New Tax System (Goods and Services Tax) Regulations 2019 Provision Contends with Sections 48-10.03A and 196-1.01 Approval of GST groups Table 4: Schedule 1 to the Taxation Administration Act 1953 Provision Contends with Section 45-287 Trust income included in instalment income of a beneficiary

Legislative references: ITAA 1936 Sch 2F | ITAA 1936 Sch 2F 272-5(1) | ITAA 1936 Sch 2F 272-5(3) | ITAA 1936 102UC | ITAA 1936 160APA | ITAA 1936 160APHD | ITAA 1997 104-72 | ITAA 1997 115-50 | ITAA 1997 115-110 | ITAA 1997 116-35 | ITAA 1997 118-510 | ITAA 1997 124-781 | ITAA 1997 Subdiv 165-F | ITAA 1997 170-265 | ITAA 1997 207-128 | ITAA 1997 415-20 | ITAA 1997 703-40 | ITAA 1997 707-325 | ITAA 1997 713-50 | ITAA 1997 719-35 | ITAA 1997 725-65 | ITAA 1997 727-110 | ITAA 1997 727-360 | ITAA 1997 727-365 | ITAA 1997 727-400 | ITAA 1997 727-410 | ITAA 1997 855-40 | ANTS(GST)R 2019 48-10.03A | ANTS(GST)R 2019 196-1.01 | TAA 1953 Sch 1 45-287

Additional content:
Updated in line with current ATO style and accessibility requirements. | Update to new LAPS format and style. | Omitted all occurrences of 'Trust Community of Practice'; substituted 'Trust Technical Network'. | Updated to reflect the changed responsibilities for the administration of Trust loss measures. | File 2002/006208; 1-1440QBJC