Trust with Nil net income - refund of imputation credits

Is a discretionary trust with a Nil net income or net loss entitled to a refund of excess imputation credits on dividends paid on or after 1 July 2000 under Division 67 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No, a discretionary trust with a Nil net income or a net loss is not entitled to a refund of excess imputation credits under Division 67 of the ITAA 1997.

A discretionary trust has Nil net income or a net loss for the year.

The trust receives franked dividend income with franking credits.

Division 67 of the ITAA 1997 deals with the refunding of excess imputation credits.

Taxpayers eligible for the refund are resident: • individuals • trustees liable to be assessed under section 98 or 99 (but not 99A) of the Income Tax Assessment Act 1936 (ITAA 1936). • superannuation funds • approved deposit funds • life assurance companies (in respect of their superannuation business) • registered organisations (in respect of their superannuation business) • pooled superannuation trusts, and • certain registered charitable and gift deductible organisations.

Subsection 67-25(1) of the ITAA 1997 makes it clear that trustees entitled to a franking credit under section 160AQY of the ITAA 1936 can only receive a refund of any excess imputation credits if they are liable to be assessed under section 98 or 99 of the ITAA 1936. In the case of a discretionary trust with no net income or a net loss there is no liability to such an assessment. The excess imputation credits are not refundable where a discretionary trust is assessed under section 99A of the ITAA 1936.