(a) except where paragraph (b) applies—the body, fund or company is treated as if it had the fixed entitlement as an individual and for the individual’s own benefit; and
(b) if the reference is in subsection 272‑105(2)—the fixed entitlement is treated as if it were held instead by more than 20 individuals and for their own benefit.
Funds or companies with 50 members or fewer
(5) In the case of a fund or company that has 50 members or fewer, the fund or company is treated as if it did not have the entitlement, but the members are treated as if they had the entitlement in equal proportions.
Mixed application of subsections (4) and (5) in certain provisions
(6) If, apart from this subsection:
(a) the following apply:
(i) for the purposes of section 266‑40 or subsection 267‑40(2), 267‑70(2), 268‑10(3), 268‑15(3) or 268‑25(4), it is necessary to determine whether individuals had fixed entitlements during a period; and
(ii) the consequences in subsection (4) would apply to a fund or company for part of the period and the consequences in subsection (5) would apply for the remainder of the period; or
(b) the following apply:
(i) for the purposes of subsection 266‑90(1) or (2), 266‑125(2), 266‑165(2) or 268‑20(3), it is necessary to determine whether individuals had fixed entitlements at 2 times; and
(ii) the consequences in subsection (4) would apply to a fund or company at one of the times and the consequences in subsection (5) would apply at the other time;
the consequences in subsection (5) instead apply to the fund or company for the whole of the period, or at both of the times, as the case may be.
Entities ceasing to be special companies
(7) If:
(a) subsection (4) or (5) applies in relation to a special company during a period (the special company period); and
(b) the special company period ends when the special company ceases to be a special company without ceasing to exist; and
(c) having regard to the matters set out in subsection (8), the Commissioner considers it fair and reasonable to treat one or more of the persons who were members of the special company immediately after it ceased to be a special company as having held the fixed entitlement mentioned in subsection (2) during the whole or part of the special company period;
then:
(d) subsection (4) or (5) does not apply in relation to the special company during the whole or the part of the special company period; and
(e) the one or more persons are, as mentioned in paragraph (c), treated as having the fixed entitlement instead of the company.
(8) For the purposes of paragraph (7)(c), the matters are:
(a) the identity of its members before and after the special company ceases to be a special company; and
(b) the circumstances in which it ceases to be a special company; and
(c) the nature of the rights in the special company held by its members before and after it ceases to be a special company; and
(d) any other matter that the Commissioner considers relevant.
272‑30 Additional special cases of fixed entitlements held directly or indirectly
Coverage of section
(1) This section also affects references in this Schedule (other than in subparagraph 269‑75(b)(ii) and section 272‑25) to a person or individual having, directly or indirectly, a fixed entitlement to a share of the income or capital of a company, partnership or trust (the main entity) at a particular time (the test time).
Note: This section will not affect a reference to a person or individual having a fixed entitlement where the phrase “directly or indirectly” is not used.
Interposed family trusts
(2) If at the test time a family trust has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity, it is treated as if it had the fixed entitlement as an individual and for the individual’s own benefit.
Interposed listed public companies and widely held unit trusts
(3) If:
(a) at the test time a listed public company or widely held unit trust has, directly or indirectly, a fixed entitlement to a share of the income or capital of the main entity; and
To find out the meaning of listed public company: see section 272‑135.
(b) having regard to the matters set out in subsection (4), the Commissioner considers it fair and reasonable to treat the company or trust as holding, at the test time, the whole or part of its fixed entitlement as an individual and for the individual’s own benefit;
the company or trust is treated as so holding the whole or the part of its fixed entitlement.
Matters for the purposes of paragraph (3)(b)
(4) For the purposes of paragraph (3)(b), the matters are:
(a) the practicability of identifying any individuals who at the test time have fixed entitlements to a share of the income or capital of the main entity indirectly through the company or trust and for their own benefit; and
(b) any change before or after the test time in the individuals who can be identified as having fixed entitlements of the kind mentioned in paragraph (a); and
(c) any other matter that the Commissioner considers relevant.
272‑35 Arrangements to pass fixed entitlement tests
(1) If the operation of a provision of this Schedule depends on or is in any way affected by an individual having a fixed entitlement directly or indirectly, and for the individual’s own benefit, to a share of the income or capital of a company, partnership or trust, an individual who would otherwise have that fixed entitlement is taken not to have it for the purposes of the operation of the provision if the condition in subsection (2) is met.
(2) The condition is that an arrangement was entered into where:
(a) the arrangement in some way (directly or indirectly) related to, affected or depended for its operation on the fixed entitlement or its value; and
(b) the purpose, or one of the purposes, of the arrangement was to ensure that, for the purposes of the operation of the provision, the individual would have the fixed entitlement.
272‑40 Continued holding of fixed entitlement where death occurs
If, immediately before an individual dies, he or she has a fixed entitlement to a share of the income or capital of a trust, partnership or company directly or indirectly, and for his or her own benefit, the individual is taken to continue to have the entitlement for so long as:
(a) it is held by someone as trustee of the individual’s estate; or
(b) it is held by someone who received it as a beneficiary of the estate.
Subdivision 272‑B—Distribution of income or capital
272‑45 Trust distribution to beneficiary
A trust distributes income or capital of the trust to a person if it:
(a) pays or credits the income or capital in the form of money to the person; or
(b) transfers the income or capital in the form of property to the person; or
(c) reinvests or otherwise deals with the income or capital on behalf of the person or in accordance with the directions of the person; or
(d) applies the income or capital for the benefit of the person;
in the person’s capacity as a beneficiary of the trust.
272‑50 Company distribution to shareholder
Distribution of income
(1) A company distributes income of the company to a person if the company pays a dividend or non‑share dividend to the person.
Distribution of capital
(2) A company distributes capital of the company to a person if:
(a) it pays or credits money, or transfers property, of the company to the person, where the amount paid or credited, or the amount or value of the property, is debited against an amount standing to the credit of the share capital account of the company; and
(b) the payment, crediting or transfer is not the payment of a dividend.
(3) A company distributes capital of the company to a person if the company makes a non‑share capital return to the person.
272‑55 Partnership distribution to partner
A partnership distributes income or capital of the partnership to a person if it:
(a) pays or credits the income or capital in the form of money to the person; or
(b) transfers the income or capital in the form of property to the person; or
(c) reinvests or otherwise deals with the income or capital on behalf of the person or in accordance with the directions of the person; or
(d) applies the income or capital for the benefit of the person;
in the person’s capacity as a partner in the partnership.
272‑60 Other distributions of income and capital
(1) A company, partnership or trust (an entity) also distributes income or capital to a person in circumstances not covered by section 272‑45, 272‑50 or 272‑55 if it:
(a) pays (including by way of a loan) or credits money of the entity to the person, or reinvests such money for the person; or
(b) transfers property of the entity to, or allows use of property of the entity by, the person; or
(c) deals with money or property of the entity for or on behalf of the person or as the person directs; or
(d) applies money or property of the entity for the benefit of the person; or
(e) extinguishes, forgives, releases or waives a debt or other liability owed by the person to the entity.
Limit on distributions
(2) However, subsection (1) only applies if, and to the extent that:
(a) the amount paid, credited, reinvested or applied, the value of the property transferred, or the value of the other thing done;
exceeds:
(b) the amount or value of any consideration given in return.
Character of distributions
(3) Each thing that is a distribution because of subsection (1) is a distribution of income unless it is clear that the money or property concerned was capital, or that the debt or liability was attributable to capital, of the entity.
272‑63 Distribute indirectly
A trust distributes income or capital indirectly to an individual if it distributes the income or capital to a company, partnership or trust (the first interposed entity) interposed between the trust and the individual and:
(a) the first interposed entity distributes to the individual an amount or property attributable to the income or capital; or
(b) another company, partnership or trust (the final interposed entity) distributes to the individual an amount or property that is attributable to the income or capital as a result of:
(i) the distribution of an amount or property attributable to the income or capital to the final interposed entity by the first interposed entity; or
(ii) successive distributions of amounts or property attributable to the income or capital to and by any companies, partnerships or trusts interposed between the first interposed entity and the final interposed entity.
Subdivision 272‑C—Fixed trusts and non‑fixed trusts
272‑65 Fixed trust
A trust is a fixed trust if persons have fixed entitlements to all of the income and capital of the trust.
272‑70 Non‑fixed trust
A trust is a non‑fixed trust if it is not a fixed trust.
Subdivision 272‑D—Family trust etc.
272‑75 Family trust
A trust is a family trust at any time when a family trust election (see subsection 272‑80(1)) in respect of the trust is in force.
272‑80 Family trust election
Nature of election
(1) Subject to this section, the trustee of the trust may make an election (the family trust election) in accordance with this section that the trust is a family trust for the purposes of this Schedule at all times after the beginning of a specified income year.
How election made
(2) The election must be in writing and in the approved form.
Election to specify individual and certain information
(3) The election must also specify an individual as the individual whose family group is to be taken into account in relation to the election, and must contain such other information as the Commissioner requires.
Trust must pass family control test
(4) If the trust does not pass the family control test (see section 272‑87) at the end of the specified income year, the trustee must not make the election.
Earlier year may be the specified year
(4A) The specified income year may be a year before the one in which the election is made if:
(a) at all times in the period from the beginning of the specified income year until 30 June in the income year before the one during which the election is made, the trust passes the family control test (see section 272‑87); and
(b) either:
(i) any conferrals of present entitlement to income or capital of the trust made by the trustee during that period have been made on; or
(ii) any distributions of income or capital of the trust made by the trustee during that period have been made to;
the individual specified in the election or members of that individual’s family group.
Election generally cannot be varied or revoked
(5) Subject to subsections (5A), (5B), (5C), (6) and (6A), the election cannot be varied or revoked.
Variation cases
(5A) The trustee of a trust may, in respect of an income year during the period specified in subsection (6B), vary an election so that a different individual (the new individual) is specified for the purposes of subsection (3) as the individual whose family group is to be taken into account in relation to the election if:
(a) the new individual was a member of the family of the individual originally specified in the election at the election commencement time; and
(b) any conferrals of present entitlement to income or capital of:
(i) the trust; and
(ii) an entity for which an interposed entity election has been made in relation to the trust;
during the period in which the election has been in force have been made on the new individual or on persons who would have been members of the new individual’s family group at the time of the conferral; and
(c) any distributions of income or capital of:
(i) the trust; and
(ii) an entity for which an interposed entity election has been made in relation to the trust;
during the period in which the election has been in force have been made to the new individual or to persons who would have been members of the new individual’s family group at the time of the distribution.
(5B) A variation of an election under subsection (5A) in relation to a trust can only be made once.
(5C) The trustee of a trust may vary an election so that a different individual (the new individual) is specified for the purposes of subsection (3) as the individual whose family group is to be taken into account in relation to the election if:
(a) an order; or
(b) an agreement; or
(c) an award;
of a kind mentioned in paragraphs 126‑5(1)(a) to (f) of the Income Tax Assessment Act 1997 results in the new individual, or a group comprising the new individual and members of the new individual’s family, having control of the trust under subsection (5D).
(5D) The new individual, or a group comprising the new individual and members of the new individual’s family, have control of the trust for the purposes of subsection (5C) if any of paragraphs 272‑87(2)(a) to (g) are satisfied in relation to a group consisting of:
(a) the new individual; or
(b) the new individual and members of the new individual’s family.
Revocation cases
(6) The trustee of a fixed trust may revoke the election if:
(a) at the beginning of the specified income year:
(i) the individual specified in the election; or
(ii) one or more members of the individual’s family; or
(iii) the trustee of another trust that is a family trust, provided the individual is specified in that trust’s family trust election;
or any combination of the above, had the fixed entitlements, directly or indirectly, and for their own benefit, to all of the income and capital of the trust; and
(b) at a later time (whether before or after the return is furnished, but while the trust is still a fixed trust), an individual, other than one of a kind mentioned in subparagraph (a)(i), (ii) or (iii), holds a fixed entitlement, directly or indirectly, and for his or her own benefit, to any of the income or capital of the trust.
(6A) The trustee of a trust may, in respect of an income year during the period specified in subsection (6B), revoke the election unless:
(a) the trust, or another entity, has incurred a tax loss and had its assessable income reduced by part or all of the loss in an income year or years during the period:
(i) beginning at the beginning of the income year specified in the election; and
(ii) finishing at the end of the income year immediately prior to the income year from which the revocation is to be effective (see subsection (8));
and the trust, or the other entity, could not have had its assessable income so reduced had the election not been in force; or
(b) the trust, or another entity, has claimed a deduction for bad debts in an income year or years during the period specified in paragraph (a) and the trust, or the other entity, could not have claimed the deduction had the election not been in force; or
(c) a beneficiary of the trust in an income year during the period specified in paragraph (a) received a franked distribution indirectly through the trust and paragraph 207‑150(1)(a) of the Income Tax Assessment Act 1997 would have applied in relation to the distribution had the election not been in force.
Period to vary or revoke the election
(6B) The trustee of a trust cannot vary or revoke the election under subsections (5A) or (6A) unless the variation or revocation is in respect of an income year that occurs during the period:
(a) beginning at the beginning of the income year specified in the election and finishing at the end of the fourth income year after the income year specified in the election; or
(b) beginning at the beginning of the income year in which Schedule 8 to the Tax Laws Amendment (2007 Measures No. 4) Act 2007 commenced and finishing at the end of the subsequent income year.