12‑405 Meaning of fund payment—general c12‑405 Meaning of fund payment—general case

12‑405 Meaning of fund payment—general case

(1) The object of this section is to ensure that the total of the *fund payments that the trustee of a trust makes in relation to an income year equals, as nearly as practicable, the net income of the trust for the income year, disregarding these amounts (excluded amounts): (a) a dividend (as defined in Division 11A of Part III of the Income Tax Assessment Act 1936) that is subject to, or exempted from, a requirement to withhold under Subdivision 12‑F; (b) interest (as so defined) that is subject to, or exempted from, such a requirement; (c) a *royalty that is subject to, or exempted from, such a requirement; (d) a *capital gain or *capital loss from a *CGT event that happens in relation to a *CGT asset that is not *taxable Australian property; (e) amounts that are not from an *Australian source; and disregarding deductions relating to excluded amounts. (1A) This section applies to a trust that is not an *AMIT for an income year.

Note: For the definition of fund payment in respect of a trust that is an AMIT for an income year, see section 12A‑110.

(2) Work out as follows how much of a payment (the actual payment) made by the trustee of a trust in relation to an income year is a fund payment in relation to that year:

Method statement

Step 1. Reduce the actual payment by so much of it that is attributable to excluded amounts, and increase it by any amounts to which subsection (2A) or (2B) applies for the income year (except to the extent that capital gains against which those amounts are applied are included in the actual payment made in relation to the income year).

Step 2. Work out what it is reasonable to expect will be the *net income of the trust for the income year:

(aa) increasing the net income by any amounts to which subsection (2A) or (2B) applies for the income year; and

(a) disregarding (except to the extent that they are amounts to which subsection (2A) or (2B) applies for the income year) excluded amounts, expected excluded amounts and deductions relating to those amounts; and

(b) on the basis that a *capital gain from *taxable Australian property of the trust that was or would be reduced under step 3 of the method statement in subsection 102‑5(1) of the Income Tax Assessment Act 1997 were double the amount it actually is.

Step 3. The fund payment is so much of the step 2 amount as is reasonable having regard to:

(a) the object of this section; and

(b) the step 1 amount; and

(c) the amounts of any earlier fund payments made by the trustee in relation to the income year; and

(d) the expected amounts of any later fund payments the trustee expects to make in relation to the income year.