{"id":"C2004A05323","name":"Family Trust Distribution Tax (Primary Liability) Act 1998","slug":"family-trust-distribution-tax-primary-liability-act-1998","collection":"act","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":"10 of 1998","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":7808,"registerId":"commonwealth-C2004A05323-current","compilationNumber":null,"startDate":"2026-03-30","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Short title","content":"#### 1 Short title\n\n  This Act may be cited as the Family Trust Distribution Tax (Primary Liability) Act 1998.","sortOrder":0},{"sectionNumber":"2","sectionType":"section","heading":"Commencement","content":"#### 2 Commencement\n\n  This Act commences on the day on which it receives the Royal Assent.","sortOrder":1},{"sectionNumber":"3","sectionType":"section","heading":"Imposition of tax","content":"#### 3 Imposition of tax\n\n  Tax payable under section 271‑15, 271‑20, 271‑25, 271‑30 or 271‑55 in Schedule 2F to the Income Tax Assessment Act 1936 on the amount or value of income or capital is imposed.","sortOrder":2},{"sectionNumber":"4","sectionType":"section","heading":"Amount of tax","content":"#### 4 Amount of tax\n\n  The amount of the tax imposed by this Act is 47% of the amount or value of the income or capital.","sortOrder":3},{"sectionNumber":"5","sectionType":"section","heading":"Temporary budget repair levy","content":"#### 5 Temporary budget repair levy\n\n  (1) This section applies:\n    (a) in relation to tax payable under section 271‑55 in Schedule 2F to the Income Tax Assessment Act 1936—to notices mentioned in that section that are given by the Commissioner in a temporary budget repair levy year; or\n    (b) otherwise—to present entitlements conferred, or distributions made, in a temporary budget repair levy year.\n  (2) Increase the amount of the percentage mentioned in section 4 by 2 percentage points.\n  (3) In this section:\n\n> temporary budget repair levy year has the same meaning as in section 4‑11 of the Income Tax (Transitional Provisions) Act 1997.","sortOrder":4}],"analysis":{"issue_detection":{"absurdities":[{"type":"impossible_compliance","section":"5(2)","severity":"medium","reasoning":"Legislative drafting of operative provisions should either state the legal effect declaratively ('the percentage is increased by 2 percentage points') or identify who must act. 'Increase' as a bare imperative is directed at nobody — not the Commissioner, not the taxpayer, not the trustee. While courts would likely interpret this as a declarative increase by operation of law, the drafting creates genuine ambiguity about whether the increase is automatic or requires some positive act, and if so, by whom.","confidence":0.72,"description":"Section 5(2) uses imperative mood ('Increase the amount of the percentage') directed at no identified actor, creating a grammatically and legally ambiguous command that is impossible to attribute to a specific party obligated to perform the increase."},{"type":"other","section":"4 and 5(2)","severity":"low","reasoning":"The policy logic of family trust distribution tax is to impose a disincentive rate equivalent to the top marginal rate. During temporary budget repair levy years, the personal top rate rose to 49% (47% + 2%), and this Act mirrors that by also rising to 49%. So the structural logic is internally consistent. However, the base rate in section 4 is expressed as a static '47%' without any acknowledgment that it is intended to track the top marginal rate, creating a rigid figure that could fall out of alignment if the top marginal rate changed independently of this Act.","confidence":0.55,"description":"Section 4 states the tax rate is '47%' as a fixed figure, while section 5(2) instructs that this percentage be 'increased by 2 percentage points' during temporary budget repair levy years, resulting in an effective rate of 49%. The top marginal income tax rate at the time was 47% (inclusive of the levy), meaning the family trust distribution tax rate during levy years would exceed the top personal marginal rate, creating a punitive rate above the nominal maximum rate on ordinary income — potentially disproportionate and anomalous."}],"contradictions":[{"severity":"low","section_a":"4","section_b":"5(2)","confidence":0.78,"description":"Section 4 definitively states 'The amount of the tax imposed by this Act is 47%' using unqualified language, while section 5(2) overrides this by increasing the percentage by 2 points during temporary budget repair levy years. Section 4 contains no qualification, carve-out, or reference to section 5, meaning a literal reading of section 4 stands in direct contradiction to the modified rate produced by section 5(2) during applicable years."}]},"kimi_summary":{"content_quality":"ok","complexity_score":4,"scope_assessment":{"changed":false,"description":"This legislation remains tightly focused on its original purpose: imposing the specific tax on family trust distributions outside the family group. The addition of section 5 (temporary budget repair levy) was a time-limited revenue measure that did not expand the fundamental scope beyond imposing the primary tax liability. The Act has not grown beyond its original intent as a charging statute."},"complexity_factors":["Extremely short statute (only 5 sections, approximately 200 words)","Heavy reliance on external legislation—core operative provisions are entirely contained in cross-references to Schedule 2F of the Income Tax Assessment Act 1936 (sections 271-15, 271-20, 271-25, 271-30, and 271-55)","No defined terms within the Act itself; meaning of 'family trust', 'family group', 'present entitlement', and 'temporary budget repair levy year' all depend on external statutory definitions","Simple mathematical calculation for tax rate (47% flat rate) with one conditional modifier (the 2 percentage point increase during levy years)","No nested exceptions or conditional logic within the Act itself—all complexity is outsourced to the ITAA 1936"],"plain_english_summary":"This law creates a special tax that applies when family trusts try to give money or assets to people outside the family group. \n\n**What it does:**\n- **Imposes a 47% tax** on certain distributions from family trusts (specifically, when trustees confer present entitlements or make distributions to people who aren't part of the 'family group' as defined in tax law)\n- This tax is called 'family trust distribution tax' and is designed to stop people using family trusts to split income with outsiders in ways that reduce overall tax\n\n**Who it affects:**\n- Trustees of family trusts who make distributions outside the designated family group\n- Beneficiaries who receive these distributions\n- Anyone involved in family trust structures who needs to ensure compliance with the 'family trust election' rules\n\n**The temporary budget repair levy:**\n- During 'temporary budget repair levy years' (a specific period when the government was trying to fix the budget), the tax rate increases by 2 percentage points to **49%**\n- This applied to distributions made or notices given during those specific years\n\n**Why it matters:**\nFamily trusts are popular for managing family wealth and income splitting, but the tax system tries to limit this to genuine family members. This law acts as a penalty when trusts break those rules—making it very expensive (nearly half the distribution) to give trust money to people outside the family circle."},"flash_summary":{"complexity_score":3,"scope_assessment":{"changed":false,"description":"The text does not indicate that it amends or narrows the scope of the referenced Schedule 2F provisions; it imposes a tax on amounts that those provisions already treat as taxable (s 3) and fixes the rate at which that tax is calculated (s 4). The Act adds a temporary percentage increase for specified years (s 5) but contains no language that changes the substantive definition of taxable events or the identity of the liable person in the referenced Schedule 2F provisions."},"complexity_factors":["Short, single‑purpose Act with a small number of operative provisions (ss 1–5) — lowers inherent textual complexity.","Relies on external provisions for core definitions and liability rules: multiple cross‑references to Schedule 2F of the Income Tax Assessment Act 1936 (s 3) and to the Income Tax (Transitional Provisions) Act 1997 for the temporary levy year definition (s 5(3)).","Conditional application of a temporary additional percentage that applies only in a specifically defined year and in slightly different ways depending on whether the item is a present entitlement/distribution or a Commissioner’s notice (s 5(1)–(2)).","The Act defines the tax rate precisely (47%) which simplifies numeric calculation (s 4), but administration requires identifying which amounts fall within the cited Schedule 2F sections — an interpretive task outside this Act.","Limited administrative detail within the Act itself; implementation depends on the procedural content of Schedule 2F and existing tax administration mechanisms (s 3; s 5)."],"plain_english_summary":"The Act imposes a flat tax on trust income or capital amounts caught by specified Schedule 2F rules, raising the effective charge on certain trust distributions to 47% (49% in a temporary budget repair levy year). It doesn’t rename who is liable—liability is determined by the relevant Schedule 2F provisions—and it interacts with Commissioner notices and other tax laws, changing after‑tax returns and incentives around distribution timing and form."},"summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"The Act remains tightly focused on its original purpose: imposing a punitive flat tax rate on out-of-family distributions from elected family trusts. The temporary budget repair levy provision was always intended as a short-term measure and did not represent a change in the Act's core scope. No evidence of scope creep from its original intent."},"complexity_factors":["Requires understanding of companion legislation — the Income Tax Assessment Act 1936 (Schedule 2F) — to fully understand which distributions trigger the tax","Cross-references to multiple specific sections (271-15, 271-20, 271-25, 271-30, 271-55) without explaining their content","The concept of 'family trust elections' and 'family groups' is defined elsewhere, making this Act incomplete on its own","The now-repealed temporary budget repair levy adds a historical layer requiring knowledge of transitional provisions","The distinction between 'primary' and secondary liability requires awareness of the companion Act to understand the full liability framework"],"plain_english_summary":"## Family Trust Distribution Tax (Primary Liability) Act 1998\n\nThis Act imposes a **tax penalty** on family trusts that distribute income or assets (capital) to people or entities outside the trust's designated 'family group'.\n\n### Who does this affect?\n- **Trustees** of family trusts (a type of trust set up to manage and distribute wealth within a family)\n- **Beneficiaries** who receive distributions from family trusts\n- Anyone involved in managing a family trust's finances\n\n### What does it do?\nWhen a family trust makes an **'election'** (a formal choice) to be treated as a family trust for tax purposes, it must only distribute income and assets within a defined family group. If it breaks this rule and distributes money or assets to someone **outside** that family group, this Act imposes a **penalty tax rate of 47%** on the value of that distribution.\n\nThis 47% rate is deliberately punishing — it matches the top personal income tax rate — to discourage trusts from exploiting family trust tax concessions while distributing wealth outside the family.\n\n### The Temporary Budget Repair Levy (historical)\nFor a limited period (the 'temporary budget repair levy years,' which ran from 2014–15 to 2016–17), the tax rate was temporarily increased by **2 percentage points to 49%**. This was a short-term budget measure and no longer applies.\n\n### Why does this matter?\nWithout this penalty, family trusts could claim generous tax concessions designed for genuine family arrangements, but then distribute profits to unrelated parties to minimise tax. This Act acts as a **strong deterrent** against that kind of misuse.\n\n### The 'Primary Liability' distinction\nThe word 'Primary' in the title signals that this Act taxes the **trustee directly**. A companion Act covers secondary liability (for beneficiaries or associates who might also be on the hook)."}},"importantCases":[],"_links":{"self":"/api/acts/family-trust-distribution-tax-primary-liability-act-1998","history":"/api/acts/family-trust-distribution-tax-primary-liability-act-1998/history","analysis":"/api/acts/family-trust-distribution-tax-primary-liability-act-1998/analysis","conflicts":"/api/acts/family-trust-distribution-tax-primary-liability-act-1998/conflicts","importantCases":"/api/acts/family-trust-distribution-tax-primary-liability-act-1998/important-cases","documents":"/api/acts/family-trust-distribution-tax-primary-liability-act-1998/documents"}}