Issue
Does section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) apply to imputation credits attached to Australian franked dividends being distributed to beneficiaries of a discretionary trust?
Decision
Yes, section 160APHO of the ITAA 1936 does apply to imputation credits attached to Australian franked dividends and as such, cannot be distributed to beneficiaries of a discretionary trust.
Facts
The trust is a discretionary trust where the beneficiaries have no fixed interest in the income or corpus of the trust. The trustee has not made a family trust election. The shares were purchased after 1 July 1997. The beneficiaries have each received more than $5000 in imputation credits. The trustee is a qualified person in relation to the dividend.
For the purposes of paragraph 160APHO(1)(a) of the ITAA 1936, neither the taxpayer nor an associate of the taxpayer has made, is under obligation to make, or is likely to make, a related payment in respect of a dividend as defined in section 160APHN of the ITAA.
Reasons for Decision
To be entitled to a franking credit, franking rebate, or intercorporate dividend rebate in relation to a particular dividend for the purposes of Division 1A of Part IIIAA of the ITAA 1936, a taxpayer must be a qualified person as defined in section 160APHD of the ITAA 1936. To be a qualified person, the beneficiaries must satisfy the requirements of subsection 160APHO(1) and paragraph 160APHO(2)(b) of the ITAA 1936.
The beneficiaries do not satisfy the requirements because they will not have held the shares for the required period, being at least 45 days for ordinary shares or 90 days for preference shares, as required by paragraph 160APHO(2)(b) of the ITAA 1936.
Amendment History
Date of Amendment Part Comment 17 June 2016 After title Inserted note regarding repealed section 160APHO of the ITAA 1936 Related ATO Interpretative Decisions Inserted related ATO IDs
Date of Amendment | Part | Comment
17 June 2016 | After title | Inserted note regarding repealed section 160APHO of the ITAA 1936
Related ATO Interpretative Decisions | Inserted related ATO IDs