Assessability of payment of accumulated foreign-source income of a non resident trust to a resident taxpayer

Is the resident taxpayer assessable on the payment of accumulated foreign-source income of a non-resident trust under section 99B of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. The resident taxpayer is assessable on the payment of accumulated foreign-source income of a non-resident trust under section 99B of the ITAA 1936.

The taxpayer was a resident of Australia during the year of income.

The taxpayer was presently entitled to a share of the foreign-source income of the non-resident trust prior to becoming a resident of Australia.

This income was accumulated in the trust and the taxpayer was subsequently paid several amounts from this accumulation after the taxpayer became a resident of Australia.

These amounts had not previously been subject to tax in Australia.

These amounts are amounts that would be included in assessable income of a resident taxpayer if they were derived by that resident taxpayer.

Subsection 99B(1) of the ITAA 1936 provides that where, during a year of income, a beneficiary who was a resident at any time during the year is paid a distribution from a trust, or has an amount of trust property applied for their benefit, that amount is to be included in the assessable income of the beneficiary.

Subsection 99B(2) of the ITAA 1936 modifies the rule in subsection 99B(1) and has the effect that the amount to be included in assessable income under subsection (1) is not to include any amount that represents either:- • corpus of the trust, but an amount will not be taken to represent corpus to the extent that it is attributable to income derived by the trust which would have been subject to tax had it been derived by a resident taxpayer; or • amounts that would not be included in assessable income of a resident taxpayer if they had been derived by that taxpayer; or • amounts that have been or will be included in the assessable income of the beneficiary under section 97 of the ITAA 1936 or have been liable to tax in the hands of the trustee under sections 98, 99 or 99A of the ITAA 1936.

The amounts paid to the resident taxpayer beneficiary represent trust income of a class which is taxable in Australia, but which has not previously been subject to Australian tax in the hands of either the beneficiary or the trustee. None of the exclusions in subsection 99B(2) apply.

Therefore, the amounts are assessable to the beneficiary under subsection 99B of the ITAA 1936.