Issue
Is the non-resident taxpayer assessable on their share of Australian sourced trust income under section 98A of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes, the non-resident taxpayer is assessable on their share of Australian sourced trust income under section 98A of the ITAA 1936.
Facts
The taxpayer was a non-resident of Australia at the end of the income year.
The taxpayer was presently entitled to a share of trust income from an Australian resident trust. The taxpayer received a distribution of income and capital gains from the trust in respect of the income year.
The trust income was not subject to withholding tax.
Reasons for Decision
Subsection 98(4) of the ITAA 1936 provides that where an individual beneficiary is presently entitled to a share of trust income and is a non-resident at the end of the income year, the trustee is liable to pay tax on that share. The trustee is taxable on: • so much of the share of the net income as is attributable to a period when the beneficiary was a resident, whatever the source of the income, and • so much of the share as is attributable to a period when the beneficiary was not a resident and is also attributable to Australian sources.
As the taxpayer was a non-resident at the end of the income year, the trustee is assessable under subsection 98(4) as described above.
In addition, section 98A of the ITAA 1936 provides that the non-resident taxpayer will also be assessable on that share of the trust income. However, subsection 98A(2) allows to the taxpayer a credit for the tax already paid by the trustee. If the tax paid by the trustee exceeds the tax payable by the taxpayer, the excess is refunded to the taxpayer.