Income tax: where a trustee is assessed under subsection 98(1) of the Income Tax Assessment Act 1936, in respect of a resident individual beneficiary under a legal disability, is the imputation rebate on dividends allowed in both the trustee's assessment and the individual's assessment?

Yes. Where a beneficiary derives other income and is required to include the trust distribution by virtue of subsection 100(1), both the trustee (section 160AQY) and the beneficiary (section 160AQX) receive the imputation rebate. However, the benefit is not actually allowed twice.

Under subsection 100(2), a beneficiary who is under a legal disability receives a credit for the tax paid or payable by the trustee on that beneficiary's share of the income entitlement. To calculate this credit the gross tax payable by the trustee under subsection 98(1) is reduced by the beneficiary's share of the trust's imputation rebate. This reduced amount is the credit allowed under subsection 100(2) in the beneficiary's assessment. Example :- During the year ended 30 June 1993 the ABC Trust derived a net income of $5,000, consisting of a fully franked dividend of $3,050 and the attached imputation amount of $1,950. The sole beneficiary "X" is presently entitled to the trust income, but as a minor, is under a legal disability. In addition to the entitlement to the trust distribution X derived $2,000 of interest during the year. All income is assessable under the provisions of Division 6AA. TRUSTEE BENEFICIARY The ABC Trust would be assessed under subsection 98(1) on a taxable income of $5,000. The tax assessed would be:- The beneficiary "X" would be assessed as-follows:- Franked dividend, s44(1) $3,050 Interest, s25(1) $2,000 Imputation amount, s160AQT(1) $1,950 Trust distribution, s100(1) Taxable Income $5,000 Franked dividend $3,050 Imputation amount $1,950 $5,000 Taxable Income $7,000 TRUSTEE BENEFICIARY Tax Payable on $5,000 @ 47% $2,350 Tax payable on $7,000 @ 47% $3,290 Less Less Imputation rebate, s160AQY $1,950 Imputation rebate, s160AQX $1,950 Tax payable by trustee, s98(1) $400 Section 100(2) credit $400 $2,350 Net Tax payable by Beneficiary $940 Note :- The combined tax paid by the trustee and the individual is $1,340, being 47% of the total income of $7,000 less the imputation rebate of $1,950.