{"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":{"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":"What this law does (mechanically)\n\n- Gives the Act its short title (Family Trust Distribution Tax (Primary Liability) Act 1998) and says it starts on the day it receives Royal Assent (ss 1–2).\n- Imposes a tax on amounts of income or capital that are subject to tax under specific provisions of Schedule 2F of the Income Tax Assessment Act 1936 — namely on amounts to which sections 271‑15, 271‑20, 271‑25, 271‑30 or 271‑55 of Schedule 2F apply (s 3).\n- Sets the tax rate at 47% of the amount or value of that income or capital (s 4).\n- Provides for a temporary increase to the percentage in certain years: where the income or capital (or notices under s 271‑55) fall in a “temporary budget repair levy year,” add 2 percentage points to the base rate (so 49% in those years) (s 5(1)–(2)). The Act refers to the Income Tax (Transitional Provisions) Act 1997 s 4‑11 for the definition of “temporary budget repair levy year” (s 5(3)).\n\nWho pays and who decides (how liability is determined)\n\n- The Act does not itself re‑define which person is legally liable; it imposes tax on amounts that are taxable under the listed Schedule 2F provisions. That means the person who is made liable under those Schedule 2F provisions is the one who will bear this tax, as determined by those provisions (s 3). \n- The Commissioner is involved where Schedule 2F uses notices (the Act expressly applies to notices mentioned in s 271‑55 when those notices are given by the Commissioner in a temporary budget repair levy year) (s 5(1)(a)).\n\nPractical effects, incentives and compliance points (mechanisms, not judgments)\n\n- In cash terms the Act raises the effective tax charge on distributions or present entitlements covered by the cited Schedule 2F sections to a fixed percentage (47%, or 49% in the temporary levy year). That changes the after‑tax value of making such distributions, which is the direct economic signal the law creates (s 4; s 5).\n- That signal can alter behaviour that relies on trust distributions: trustees and beneficiaries may change timing or form of distributions (retain rather than distribute, alter who receives distributions, or restructure receipts) in response to the higher tax rate. The Act itself achieves this by changing the percentage used to calculate the tax on the specified amounts (s 3–4).\n- Administrative/compliance burden: parties affected must identify amounts that fall under the listed Schedule 2F provisions, calculate the tax at the specified percentage, and comply with any notice or payment mechanisms set out in Schedule 2F and related rules. Where the Commissioner issues notices under s 271‑55, those notices interact with the temporary levy rule in s 5(1)(a).\n- Legal and operational reliance on other laws: the Act depends on the content of Schedule 2F (Income Tax Assessment Act 1936) to determine taxable events and on the Income Tax (Transitional Provisions) Act 1997 for the temporary levy year definition. This creates cross‑Act dependencies for interpretation and administration (s 3; s 5(3)).\n\nImplementation risk and discretion\n\n- The Act sets a fixed percentage; it does not itself create discretionary rates or exemptions. Any administrative discretion arises from the underlying Schedule 2F provisions (for example, use of Commissioner notices under s 271‑55) and from how other tax laws define the taxable events and liable persons (s 3; s 5(1)(a)).\n\nWhat is not in the text\n\n- The Act does not state policy objectives, socio‑economic rationale, or transitional arrangements beyond the temporary levy reference. It also does not itself specify the identity of the liable person; that is left to the cited Schedule 2F provisions (s 3)."},"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)."},"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."}]}},"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"}}