Attribution Managed Investment Trusts: 'carry-forward trust component deficit'

This Ruling explains how to work out a 'trust component deficit' where an attribution MIT (AMIT) [1] has a 'carry-forward trust component deficit' as these terms are used in Division 276 of the Income Tax Assessment Act 1997 (ITAA 1997) [2] (the attribution regime for MITs).

This Ruling is a public ruling, effective for those who rely on it in good faith in respect of assessments for income years starting on or after: • 1 July 2016, or • if the trustee has made an irrevocable choice to apply the new tax system for its 2015-16 income year which starts on or after 1 July 2015 - 1 July 2015.

In working out the trust component of a particular character of assessable income, an AMIT decreases that trust component by the amount of any carry-forward trust component deficit of that character. [3] This decrease may itself give rise to a trust component deficit because the carry-forward trust component deficit is one of the amounts applied in working out any trust component deficit of that income year. [4] That trust component deficit, if any, may then be allocated against the AMIT's other trust components of a character of assessable income for that income year. [5]

In year 1, an AMIT has a carry-forward trust component deficit of $1,000 of a character of rental income. In year 2, the AMIT has a trust component of rental income of $100. As a result, the trust component of that character for year 2 is nil, and the trust component deficit is $900. The trust component deficit of $900 may be allocated against the AMIT's other trust components in year 2. It is only if the AMIT chooses not to do so, or if those other trust components are less than $900, that the AMIT will have a carry-forward trust component deficit of a character of rental income in year 2. [6]