Issue
Is the taxpayer, a trustee of a trust, entitled to a refund of an excess franking tax offset under section 67-30 of the Income Tax Assessment Act 1997 (ITAA 1997) where they are assessed under section 98 of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. The taxpayer, a trustee of a trust, is not entitled to a refund of an excess franking tax offset under section 67-30 of the ITAA 1997 where they are assessed under section 98 of the ITAA 1936.
Facts
The taxpayer is the trustee of a trust.
The taxpayer owns shares in a company.
Fully franked dividends were paid to the taxpayer on or after 1 July 2000.
The taxpayer made a trust distribution, including franked dividends, to a person under a legal disability. The taxpayer was assessed on this distribution under section 98 of the ITAA 1936 for an income year ending on or after 22 May 2001.
The taxpayer was entitled to a franking tax offset with regard to those dividends.
The total of the franking tax offset exceeded the amount of tax payable by the taxpayer if they had not received that tax offset.
Reasons for Decision
Section 160AQY of the ITAA 1936 provides that where a trustee is liable to be assessed under section 98 of the ITAA 1936 (other that subsection 98(3) of the ITAA 1936), or under sections 99 or 99A of the ITAA 1936, on a trust amount and an imputation credit is included in a trustee's assessable income, the taxpayer is entitled to a franking tax offset of that amount.
Generally the sum of any tax offsets available to a taxpayer is limited to the amount of tax payable (section 160AD of the ITAA 1936).
However, with effect from 1 July 2000, certain franking tax offsets are subject to the refundable tax offset rules under Division 67 of the ITAA 1997.
Paragraph 67-25(1)(c) of the ITAA 1997 provides that where a tax offset is available under section 160AQY of the ITAA 1936, that tax offset is subject to the refundable tax offset rules.
However, with regard to assessments for an income year ending on or after 22 May 2001, subsection 67-25(1B) of the ITAA 1997 applies. That subsection provides that the tax offset referred to in paragraph 67-25(1)(c) of the ITAA 1997 is only subject to the refundable tax offset rules if the trustee entitled to the tax offset is liable to be assessed under section 99 of the ITAA 1936.
The franked dividend received by the taxpayer was paid on or after 1 July 2000. The taxpayer is entitled to a franking tax offset for the amount of the imputation credit that is included in their assessable income. However, the taxpayer was assessed on the distribution made to the minor beneficiary under section 98 of the ITAA 1936. As the taxpayer was not assessed on the distribution under section 99 of the ITAA 1936 the requirement under subsection 67-25(1B) of the ITAA 1997 is not met.
Therefore, the taxpayer is not entitled to a refund of the excess franking tax offset under section 67-30 of the ITAA 1997.