This Act creates a special “trust recoupment tax” regime to reclaim tax where trust or company income arrangements are treated as tax avoidance. It defines primary, secondary, company and elected taxable amounts, pins liability on trustees, beneficiaries or companies (including joint and several liability), and allows people to request the Commissioner to treat specified amounts as assessable income or deemed dividends.
It matters because it imposes taxable liabilities and penalty formulas, sets procedural rules for assessments and requests, and gives the Commissioner discretion over granting requests and remitting penalties.
This Act creates the statutory framework for assessing and collecting "trust recoupment tax" and related additional taxes where distributions from trusts (and certain company distributions treated as analogous) arise from tax avoidance schemes. It operates by defining several classes of taxable amounts (primary, secondary, company and elected taxable amounts), prescribing when those amounts are taken to exist, allocating legal liability to trustees, beneficiaries and companies, and providing a mechanism by which affected persons can ask the Commissioner to treat amounts as assessable income instead of being subject to trust recoupment tax (the request procedure). The Act also prescribes penalty tax outcomes for schemes entered into in specified periods and provides anti‑avoidance enforcement tools in prescribed recovery proceedings (s 3, s 5, s 6, s 7, s 8, s 12, s 13).
Mechanically, the Act:
Defines key terms and what counts as a tax avoidance scheme for the Act’s purposes (s 3(1), s 3(4)-(6)). The definition of scheme is broad and includes unilateral schemes (s 3(2)), and the tax avoidance test requires consideration of form, substance, timing, financial result and purpose (s 3(4)).
Deems trust recoupment tax assessed under this Act to be payable notwithstanding that it has not become due and payable (s 3(6)).
Applies, mutatis mutandis, many procedural and substantive provisions of the Income Tax Assessment Act 1936/1997 (the Assessment Act) and the Taxation Administration Act 1953 (TAA) for assessment and collection purposes (s 4(1)-(3)). This makes the Assessment Act and TAA the procedural backbone for assessments, amendments, penalties, interest and so on.
Creates "primary taxable amounts" where a beneficiary’s vested but non‑present entitlement to trust income arose out of or because of a tax avoidance scheme and the present value of the benefit to the beneficiary is less than 50% of the relevant trust income (s 5(1)(a)-(g)). When those conditions are met, the beneficiary is treated as never having been presently entitled to that income for Assessment Act purposes (s 5(1)(f)), and a primary taxable amount equal to the relevant amount of trust net income is taken to exist in relation to the trustee (s 5(1)(g)).
Current sections
Direct links to the current provisions in Trust Recoupment Tax Assessment Act 1985.
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1
Short title
1 Short title
This Act may be cited as the Trust Recoupment Tax Assessment Act 1985.
2
Commencement
2 Commencement
This Act shall come into operation on the day on which it receives the Royal Assent.
3
Interpretation
3 Interpretation
(1) In this Act, unless the contrary intention appears:
applied penalty tax means a penalty under Part 4‑25 in Schedule 1 to the Taxation Administration Act 1953 in relation to trust recoupment tax.
Assessment Act means the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997.
associate has the same meaning in relation to a person as that expression has in relation to a person in section 318 of the Assessment Act.
company does not include a company in the capacity of trustee of a trust estate.
company taxable amount, in relation to a person, means an amount that is a company taxable amount in relation to the person under section 7.
distribution of income means:
(a) in relation to a company in relation to a particular time—a distribution of income of the company of the year of income of the company in which that time occurred among the shareholders of the company at that time, being a distribution of income by payment of a dividend; and
(b) in relation to a trust estate in relation to a particular time—a distribution of income of the trust estate of the year of income of the trustee in which that time occurred among the beneficiaries of the trust estate at that time and the persons who could have become beneficiaries of the trust estate at that time by the exercise of a power of appointment by the trustee of the trust estate or by another person, being a distribution of income that is paid to, or applied for the benefit of, those persons as beneficiaries of the trust estate.
elected taxable amount, in relation to a person, means an amount that is an elected taxable amount in relation to the person under subsection 7(7).
eligible beneficiaries class, in relation to a secondary taxable amount, means the eligible beneficiaries class ascertained under section 6 in relation to that secondary taxable amount.
late payment tax means general interest charge under Part IIA of the Taxation Administration Act 1953 in relation to trust recoupment tax, applied penalty tax or penalty tax.
penalty tax means additional tax payable under section 12.
person includes a company and a person in the capacity of trustee of a trust estate.
prescribed person, in relation to a taxable amount, means:
(a) a natural person other than a person in the capacity of trustee of a trust estate;
(b) a person (other than a person referred to in paragraph (c)) in respect of whom a relevant exempting provision applied in relation to the year of income to which the taxable amount relates;
(c) a person in the capacity of trustee of a trust estate, being a trust estate that is a provident, benefit, superannuation or retirement fund; or
(d) a company that is, by virtue of the application of paragraph 103A(2)(c) or subparagraph 103A(2)(d)(i), (iii) or (iv) of the Assessment Act, a public company for the purposes of Division 7 of Part III of that Act in relation to the year of income to which the taxable amount relates.
primary taxable amount, in relation to a person, means an amount that is a primary taxable amount in relation to the person under section 5.
primary trust income, in relation to a primary taxable amount that exists in relation to the trustee of a trust estate, means the income or the part of the income of the trust estate to which the primary taxable amount is attributable.
property includes:
(a) a chose in action;
(b) any estate, interest, right or power, whether at law or in equity, in or over property; and
(c) any right to receive income.
relevant distribution time, in relation to a taxable amount that exists in relation to a company or the trustee of a trust estate, means:
(a) if the company or trust estate did not exist immediately before the tax avoidance scheme to which the taxable amount relates was entered into—the time when the company or trust estate commenced to exist; or
(b) in any other case—the time immediately before the time when the tax avoidance scheme to which the taxable amount relates was entered into;
or, if the Commissioner is of the opinion that that time is inappropriate, such later time as the Commissioner determines.
relevant exempting provision has the same meaning as in Division 9C of Part III of the Assessment Act.
right to receive income means a right of a person to have income that will or may be derived (whether from property or otherwise) paid to, or applied or accumulated for the benefit of, the person.
scheme means:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct.
secondary taxable amount, in relation to a person or persons, means an amount that is a secondary taxable amount under section 6 in relation to an eligible beneficiaries class in which the person is, or the persons are, included.
taxable amount means a primary taxable amount, a secondary taxable amount, a company taxable amount or an elected taxable amount.
trust recoupment tax means tax assessed under this Act and imposed by the Trust Recoupment Tax Act 1985.
(2) The reference in the definition of scheme in subsection (1) to a scheme, plan, proposal, action, course of action or course of conduct shall be read as including a reference to a unilateral scheme, plan, proposal, action, course of action or course of conduct, as the case may be.
(3) In this Act, a reference to the time of entry into a scheme is a reference to:
(a) if the scheme is a unilateral scheme—the time when the scheme is commenced to be carried out; and
(b) in any other case—the time when the scheme is entered into.
(4) For the purposes of this Act, a scheme shall be taken to be a tax avoidance scheme if and only if, having regard to:
(a) the manner in which the scheme was entered into or carried out;
(b) the form and substance of the scheme;
(c) the time at which the scheme was entered into and the length of the period during which the scheme was carried out;
(d) the result in relation to the operation of the Assessment Act that, but for section 100A and Part IVA of that Act, would be achieved by the scheme;
(e) any change in the financial position of any person that has resulted, will result or may reasonably be expected to result from the scheme; and
(f) any other consequence for any person of the scheme having been entered into or carried out;
it would be concluded that the person, or any of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of securing that a person or persons (whether or not a particular person or particular persons) who, if the scheme had not been entered into or carried out, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than the person or persons would have been liable to pay if the scheme had not been entered into or carried out.
(5) In subsection (4):
(a) a reference to the carrying out of a scheme or a part of a scheme by a person shall be read as including a reference to the carrying out of a scheme or a part of a scheme by a person together with another person or other persons; and
(b) a reference to a scheme or a part of a scheme being entered into or carried out by a person for a particular purpose shall be read as including a reference to a scheme or a part of a scheme being entered into or carried out by the person for 2 or more purposes of which that particular purpose is the dominant purpose.
(6) For the purposes of this Act, trust recoupment tax that has been assessed shall be deemed to be payable notwithstanding that it has not become due and payable.
4
Application of tax legislation
4 Application of tax legislation
(1) Unless the contrary intention appears in this Act, sections 6 and 7A, Part II, section 21, Part IV, section 204, and Parts VII and VIII of the Assessment Act, Part IIA of, and Part 4‑15 in Schedule 1 to, the Taxation Administration Act 1953, and regulations made under those Acts, apply for the purposes of the assessment and collection of trust recoupment tax and penalty tax, in like manner, mutatis mutandis, as those provisions apply for the purposes of the assessment and collection of income tax under the Assessment Act.
(2) A reference in this Act to a provision of the Assessment Act or of the Taxation Administration Act 1953 shall, unless the contrary intention appears, be read as a reference to that provision in its application, in accordance with subsection (1), for the purposes of this Act.
(3) For the purposes of section 14 of the Assessment Act, this Act shall be deemed to be part of the Assessment Act.
(4) Nothing in section 355‑25 or 355‑155 in Schedule 1 of the Taxation Administration Act 1953 prevents:
(a) the disclosure, to a person who is, or in the opinion of the Commissioner is likely to become, liable to pay trust recoupment tax, or to pay income tax by virtue of the operation of section 7 of this Act, of information relating to the affairs of another person where that information was, or in the opinion of the Commissioner is likely to be, taken into account in the assessment of the liability of the first‑mentioned person to pay trust recoupment tax, or to pay income tax by virtue of the operation of section 7 of this Act, as the case may be; or
(b) the disclosure, to a person who is, or in the opinion of the Commissioner is likely to become, jointly and severally liable with other persons to pay trust recoupment tax, of the identity of, and particulars of the liability of, any of the other persons liable to pay that trust recoupment tax.
(5) Nothing in section 170 of the Assessment Act prevents the amendment, at any time, of an assessment for the purpose of giving effect to subsection 6(2) or section 7 of this Act.
(7) Unless the contrary intention appears, a reference in section 215 of the Assessment Act to tax shall be deemed to include a reference to:
(a) trust recoupment tax;
(b) late payment tax;
(c) applied penalty tax; and
(d) penalty tax.
(9) For the purposes of the application of any of the provisions of the Assessment Act or of the Taxation Administration Act 1953 in accordance with subsection (1), where 2 or more persons are jointly and severally liable to pay trust recoupment tax, or penalty tax, on a secondary taxable amount, service of a notice of assessment or any other notice in respect of that liability on any of those persons shall be deemed to be service of the notice on each of those persons.
(10) The validity of an assessment of the trust recoupment tax or penalty tax payable on a secondary taxable amount by the persons included in an eligible beneficiaries class in relation to that secondary taxable amount is not affected by reason that the notice of assessment identifies only one or some of the persons included in that eligible beneficiaries class.
5
Primary taxable amounts
5 Primary taxable amounts
(1) Subject to subsections (2) and (3), where:
(a) at any time, whether before or after the commencement of this Act, a beneficiary of a trust estate had a vested and indefeasible interest in any of the income of the trust estate of a year of income (in this subsection referred to as the relevant year of income);
(b) the beneficiary was not presently entitled to that income but would, apart from this section and subsection 100A(1) of the Assessment Act, have been deemed for the purposes of that Act to be presently entitled to that income;
(c) the vested and indefeasible interest of the beneficiary in the whole or a part of that income (which whole or part is in this subsection referred to as the relevant trust income) arose out of a tax avoidance scheme, or by reason of any act, transaction or circumstance that occurred as part of, in connection with or as a result of a tax avoidance scheme, entered into on or after 12 May 1982;
(d) by reason of, as a result of or as part of the tax avoidance scheme or by reason of any act, transaction or circumstance that has occurred, will occur, or may reasonably be expected to occur, being an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance scheme, the present value of the benefit, or the sum of the present values of each of the benefits, that has or have been, will be, or may reasonably be expected to be, derived by the beneficiary as a consequence of the vested and indefeasible interest of the beneficiary in the relevant trust income is less than 50% of the amount of the relevant trust income; and
(e) by reason that the beneficiary would, apart from this section and subsection 100A(1) of the Assessment Act, have been deemed for the purposes of that Act to be presently entitled to the relevant trust income, the trustee of the trust estate would not have been liable to be assessed and to pay tax under section 99 or 99A of that Act in respect of the net income or a part of the net income (which net income or part is in this subsection referred to as the relevant amount) of the trust estate of the relevant year of income;
the following provisions have effect:
(f) the beneficiary shall, for the purposes of the Assessment Act other than sections 99 and 99A, be deemed not to be, and never to have been, presently entitled to the relevant trust income;
(g) a primary taxable amount equal to the relevant amount shall be taken to exist in relation to the trustee of the trust estate in relation to the relevant year of income.
(2) Subject to subsection (3), where:
(a) by reason of the application of subsection (1) or of this subsection, a primary taxable amount exists in relation to the trustee of a trust estate (in this subsection referred to as the sub‑trust) in relation to a year of income (in this subsection referred to as the relevant year of income) in relation to a tax avoidance scheme (in this subsection referred to as the relevant scheme);
(b) apart from this section and section 100A of the Assessment Act, the trustee of the sub‑trust:
(i) was presently entitled to a share of the income of another trust estate (in this subsection referred to as the head trust) of the relevant year of income;
(ii) would, by reason that income of another trust estate (in this subsection also referred to as the head trust) of the relevant year of income was paid to, or applied for the benefit of, the trustee of the sub‑trust, have been deemed, for the purposes of the Assessment Act, to be presently entitled to income of the head trust; or
(iii) would, by reason that the trustee of the sub‑trust had a vested and indefeasible interest in any of the income of another trust estate (in this subsection also referred to as the head trust) of the relevant year of income, have been deemed, for the purposes of the Assessment Act, to be presently entitled to that income of the head trust;
(c) in a case to which subparagraph (b)(i) applies—the present entitlement of the trustee of the sub‑trust to the share or to a part of the share (which share or part is in this subsection referred to as the relevant head trust income) of the income of the head trust referred to in that subparagraph arose out of the relevant scheme or arose by reason of any act, transaction or circumstance that occurred as part of, in connection with or as a result of the relevant scheme;
(d) in a case to which subparagraph (b)(ii) applies—the whole or a part (which whole or part is in this subsection also referred to as the relevant head trust income) of the income of the head trust referred to in that subparagraph was paid or applied as mentioned in that subparagraph as a result of the relevant scheme or as a result of any act, transaction or circumstance that occurred as part of, in connection with or as a result of the relevant scheme; and
(e) in a case to which subparagraph (b)(iii) applies—the vested and indefeasible interest of the trustee of the sub‑trust in the whole or a part (which whole or part is in this subsection also referred to as the relevant head trust income) of the income of the head trust referred to in that subparagraph arose out of the relevant scheme or arose by reason of any act, transaction or circumstance that occurred as part of, in connection with or as a result of the relevant scheme;
the following provisions have effect:
(f) the primary taxable amount referred to in paragraph (a) shall be reduced by so much of that amount as is attributable to the relevant head trust income;
(g) a primary taxable amount equal to the amount of the reduction referred to in paragraph (f) shall be taken to exist in relation to the trustee of the head trust in relation to the relevant year of income.
(3) Where, but for this subsection, 2 or more primary taxable amounts (in this subsection referred to as the original taxable amounts) would be taken to exist in relation to the trustee of a trust estate in relation to a year of income in relation to a tax avoidance scheme by reason of the application of subsection (1) or (2):
(a) the original taxable amounts shall not be taken to exist; and
(b) a primary taxable amount equal to the aggregate of the original taxable amounts shall be taken to exist in relation to the trustee of the trust estate in relation to the year of income.
(4) For the purposes of paragraphs (1)(c) and (2)(e), but without limiting the generality of those paragraphs, where:
(a) a tax avoidance scheme was entered into at or after the time when a person became a beneficiary of a trust estate; and
(b) the amount (in this subsection referred to as the increased amount) of the income of the trust estate in which the beneficiary had a vested and indefeasible interest exceeds the amount (in this subsection referred to as the original amount) of the income of the trust estate in which the beneficiary would have had, or could reasonably be expected to have had, a vested and indefeasible interest if the tax avoidance scheme had not been entered into or if an act, transaction or circumstance that occurred as part of, in connection with or as a result of the tax avoidance scheme had not occurred;
the vested and indefeasible interest of the beneficiary in so much of the increased amount as exceeds the original amount shall be taken to have arisen out of the tax avoidance scheme.
(5) In paragraph (1)(d) a reference to the present value of a benefit that has been, will be, or may reasonably be expected to be, derived by a beneficiary of a trust estate as a consequence of a vested and indefeasible interest of the beneficiary in the relevant trust income referred to in that paragraph is a reference to:
(a) where the benefit was derived before the end of the year of income in which the relevant trust income was derived—the amount or value of the benefit at the time at which it was derived; or
(b) in any other case—an amount ascertained in accordance with the formula View image in the official source where:
A is the amount or value of the benefit at the time at which it was, will be, or may reasonably be expected to be, derived; and
n is the number of years between the end of the year of income in which the relevant trust income was derived and the time referred to in component A.
(6) For the purposes of paragraph (2)(c), but without limiting the generality of that paragraph, where:
(a) a tax avoidance scheme was entered into at or after the time when a person became a beneficiary of a trust estate; and
(b) the amount (in this subsection referred to as the increased amount) of the share of the income of the trust estate to which the beneficiary was presently entitled exceeds the amount (in this subsection referred to as the original amount) of the income of the trust estate to which the beneficiary would have been, or could reasonably be expected to have been, presently entitled if the tax avoidance scheme had not been entered into or if an act, transaction or circumstance that occurred as part of, in connection with or as a result of the tax avoidance scheme had not occurred;
the present entitlement of the beneficiary to so much of the increased amount as exceeds the original amount shall be taken to have arisen out of the tax avoidance scheme.
(7) For the purposes of paragraph (2)(d), but without limiting the generality of that paragraph, where:
(a) a tax avoidance scheme was entered into at or after the time when a person became a beneficiary of a trust estate; and
(b) income of the trust estate was paid to, or applied for the benefit of, the beneficiary and the amount (in this subsection referred to as the increased amount) of that income exceeds the amount (in this subsection referred to as the original amount) that would have been, or could reasonably be expected to have been, paid to, or applied for the benefit of, the beneficiary if the tax avoidance scheme had not been entered into or if an act, transaction or circumstance that occurred as part of, in connection with or as a result of the tax avoidance scheme had not occurred;
so much of the increased amount as exceeds the original amount shall be taken to be income of the trust estate that was paid to, or applied for the benefit of, the beneficiary as a result of the tax avoidance scheme.
(8) A primary taxable amount may be taken to exist in relation to the trustee of a trust estate notwithstanding that the trust estate has ceased to exist.
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Secondary taxable amounts
6 Secondary taxable amounts
(1) Where:
(a) a primary taxable amount exists in relation to the trustee of a trust estate in relation to a year of income; and
(b) either of the following conditions is satisfied:
(i) the trust estate ceased to exist before the commencement of this Act;
(ii) the trust estate has ceased to exist after the commencement of this Act and an assessment of the trust recoupment tax payable on the primary taxable amount was not made before the trust estate ceased to exist;
a secondary taxable amount of an amount equal to the primary taxable amount shall be taken to exist in relation to the eligible beneficiaries class in relation to the year of income.
(2) Where:
(a) a primary taxable amount exists in relation to the trustee of a trust estate (in this subsection referred to as the relevant trust estate) in relation to a year of income;
(b) during the period (in this subsection referred to as the relevant period) after the time when the tax avoidance scheme to which the primary taxable amount relates was entered into and before the time of service of any notice of assessment in respect of trust recoupment tax payable on the primary taxable amount:
(i) any beneficial interest in the relevant trust estate was sold; or
(ii) any beneficial interest in another trust estate that at any time during the relevant period was a holding trust estate in relation to the relevant trust estate was sold; and
(c) the Commissioner is of the opinion that, by reason of a circumstance mentioned in paragraph (b), it would be unreasonable that the trustee of the relevant trust estate be liable to pay trust recoupment tax on the primary taxable amount;
the following provisions have effect:
(d) a secondary taxable amount of an amount equal to the primary taxable amount shall be taken to exist in relation to the eligible beneficiaries class in relation to the year of income;
(e) the trustee of the relevant trust estate is not liable, and shall be deemed never to have been liable, to pay trust recoupment tax on the primary taxable amount.
(3) Where:
(a) there remains unpaid an amount of trust recoupment tax payable by the trustee of a trust estate on a primary taxable amount that exists in relation to the trustee in relation to a year of income and the Commissioner is of the opinion that the trust recoupment tax, or part of the trust recoupment tax, is unlikely to be paid; or
(b) a trust estate ceases to exist at a time when there remains unpaid an amount of trust recoupment tax payable by the trustee on a primary taxable amount that exists in relation to the trustee in relation to a year of income;
a secondary taxable amount shall be taken to exist in relation to the eligible beneficiaries class in relation to the year of income of an amount equal to the amount of the unpaid trust recoupment tax multiplied by 2.22.
(4) Subject to subsection (5), for the purposes of the application of subsection (1), (2) or (3) in relation to a primary taxable amount, the eligible beneficiaries class includes each person who has derived, or might reasonably be expected to derive, a benefit that would not have been derived, or might reasonably be expected not to have been derived, if the primary trust income in relation to the primary taxable amount had not been derived.
(5) In subsection (4), a reference to a benefit shall be read as not including a reference to:
(a) a benefit referred to in paragraph 5(1)(d) derived by a beneficiary to whom paragraph 5(1)(f) applies; and
(b) a benefit derived by a person (not being a person who at any time after the time when the tax avoidance scheme to which the primary taxable amount relates was entered into was an associate of the trustee of the trust estate in relation to which the primary taxable amount exists) from a transaction the parties to which were dealing with each other at arm’s length in relation to the transaction.
(6) For the purposes of the application of this Act in relation to trust recoupment tax payable or paid on a secondary taxable amount, the eligible beneficiaries class in relation to the secondary taxable amount shall not be taken to include any person who was not included in that class at the time when the notice of assessment in respect of the trust recoupment tax was served.
(7) For the purposes of this section, a trust estate is a holding trust estate in relation to another trust estate at a particular time if the trustee of the first‑mentioned trust estate has a beneficial interest in the other trust estate at that time.
(8) For the purposes of subsection (7), where the trustee of a trust estate has a beneficial interest in a second trust estate and the trustee of the second trust estate has a beneficial interest in a third trust estate (including a beneficial interest that the trustee of the second trust estate has in the third trust estate by another application or other applications of this subsection), the trustee of the first‑mentioned trust estate shall be deemed to have a beneficial interest in the third trust estate.
(9) In this section, unless the contrary intention appears, trust recoupment tax includes late payment tax and penalty tax.
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Requests to eliminate trust recoupment tax on certain taxable amounts
7 Requests to eliminate trust recoupment tax on certain taxable amounts
(1) Subject to subsections (3) and (5), where:
(a) a primary taxable amount exists in relation to the trustee of a trust estate (in this subsection referred to as the relevant trust estate); and
(b) if there had been a distribution (in this subsection referred to as the income distribution) at the relevant distribution time of income of the relevant trust estate of an amount equal to the primary taxable amount, an eligible person or eligible persons would have received, or might reasonably be expected to have received, the whole or a part of the income distribution if there had been successive distributions of the relative parts of the income distribution to and by each of any trustees, not being prescribed persons, interposed between the relevant trust estate and the eligible person or eligible persons;
the eligible person or all the eligible persons, as the case may be, may make a request that this section should apply in relation to the eligible person or all the eligible persons, as the case may be, in relation to the primary taxable amount.
(2) Subject to subsection (5), where:
(a) an elected taxable amount exists in relation to a company (in this subsection referred to as the relevant company); and
(b) if there had been a distribution (in this subsection referred to as the income distribution) at the relevant distribution time of income of the relevant company of an amount equal to 48.6% of the elected taxable amount, a prescribed person or prescribed persons would have received, or might reasonably be expected to have received, the whole or a part of the income distribution if there had been successive distributions of the relative parts of that income distribution to and by each of any companies or trustees, not being prescribed persons, interposed between the relevant company and the prescribed person or prescribed persons;
the prescribed person or all the prescribed persons, as the case may be, may make a request that this section should apply in relation to the prescribed person or all the prescribed persons, as the case may be, in relation to the elected taxable amount.
(3) Where:
(a) a company (in this subsection referred to as the relevant company) not being a prescribed person would, but for this subsection, be entitled to make a request under subsection (1) either alone or together with another person or other persons; and
(b) if there had been a distribution (in this subsection referred to as the relevant income distribution) at the relevant distribution time of income of the relevant company of an amount equal to 48.6% of the amount that, for the purposes of the application of subsection (1), is the amount of the income distribution referred to in that subsection that would have been, or might reasonably be expected to have been, received by the relevant company, a prescribed person or prescribed persons would have received, or might reasonably be expected to have received, the whole or a part of the relevant income distribution if there had been successive distributions of the relative parts of the relevant income distribution to and by each of any companies or trustees, not being prescribed persons, interposed between the relevant company and the prescribed person or prescribed persons;
the prescribed person or all the prescribed persons, as the case may be, may, with the leave of the Commissioner, make, or be a party to, the request in lieu of the company.
(4) Subject to subsection (5), a request under this section in relation to a taxable amount (in this subsection referred to as the relevant taxable amount) shall:
(a) be in writing signed by the person or each of the persons, as the case may be, making the request;
(b) in the case of a request (not being a substitution request) made by a person or persons under subsection (1)—specify an amount in relation to the person equal to the relevant taxable amount, or amounts in relation to the persons equal in the aggregate to the relevant taxable amount, as the case may be;
(c) in the case of a substitution request:
(i) specify:
(A) an amount (in this paragraph referred to as the relevant company amount) in relation to the replacement company, or an amount (in this paragraph also referred to as the relevant company amount) in relation to each of the replacement companies; and
(B) an amount in relation to the other person or each of the other persons (if any) who would, apart from subsection (3), be entitled to make the request under subsection (1);
such that the sum of:
(C) the relevant company amount or the relevant company amounts, as the case may be; and
(D) the amount, or the amounts, as the case may be, specified under sub‑subparagraph (B);
equals the relevant taxable amount; and
(ii) specify in relation to the person, or in relation to each of the persons, entitled by virtue of subsection (3) to make the request in lieu of a company referred to in subparagraph (i) an amount such that the amount, or the aggregate of the amounts, as the case may be, specified in relation to the company equals 48.6% of the relevant company amount in relation to the company;
(d) in the case of a request made by a person or persons under subsection (2)—specify an amount in relation to the person equal to 48.6% of the relevant taxable amount, or amounts in relation to the persons equal in the aggregate to 48.6% of the relevant taxable amount, as the case may be; and
(e) be sent to or lodged with the Commissioner:
(i) in a case to which subparagraph (ii) does not apply—not later than 30 days after the date of service of a notice of assessment (not being an amended assessment) in relation to the trust recoupment tax payable on the relevant taxable amount; or
(ii) if a notice of assessment (not being an amended assessment) is served in relation to the trust recoupment tax payable on a secondary taxable amount derived by virtue of subsection 6(1) or (2) from the relevant taxable amount—not later than 30 days after the date of service of that notice;
or before such later date as the Commissioner allows.
(5) Where a request under this section in relation to a taxable amount is not made by the person or persons who, but for this subsection, would be required to make the request and either or both of the following conditions is or are satisfied:
(a) where the request was not made by all the persons who, but for this subsection, would be required to make the request:
(i) the request was not so made by reason that:
(A) any of the persons has died or, being a company that is a prescribed person, has ceased to exist;
(B) if any of the persons was a prescribed person by virtue of being the trustee of a trust estate—the trust estate has ceased to exist; or
(C) the whereabouts of any of the persons, not being a company, is not known; or
(ii) the Commissioner is satisfied that other special circumstances exist by reason of which it would be unreasonable that all the persons who, but for this subsection, would be required to make the request, should make the request;
(b) where the person or persons making the request was, or included, a person or persons who, but for this subsection, would not be entitled to make the request—the Commissioner considers it appropriate that the person or persons should be entitled to make the request by reason that an amount that is not included in the assessable income of the person of a year of income would have, or might reasonably be expected to have, been included in the assessable income of the person of the year of income if the tax avoidance scheme to which the taxable amount relates had not been entered into or carried out;
the Commissioner may waive compliance with the provisions of this section in relation to:
(c) the persons who are required to make the request; and
(d) in a case to which paragraph (a) applies—the requirement under subsection (4) that the amount, or the aggregate of the amounts, specified in the request be equal to a particular amount.
(6) On receipt of a request under this section, the Commissioner, having regard to:
(a) in relation to amounts specified in the request in lieu of which different amounts could have been specified—whether those amounts specified in the request are reasonable having regard to:
(i) in the case of amounts specified in the request in relation to persons who would not have been parties to the request but for subsection (5)—the amounts that, as mentioned in paragraph (5)(b), would have, or might reasonably be expected to have, been included in the assessable incomes of those persons if the tax avoidance scheme to which the taxable amount to which the request relates had not been entered into or carried out; and
(ii) in the case of amounts specified in the request in relation to other persons—the part of the income distribution referred to in subsection (1), (2) or (3) in relation to the request that, in the opinion of the Commissioner, would have, or might reasonably be expected to have, been received by each of those persons;
(b) the likelihood that any tax that may become payable by reason of the operation of this section in relation to the request will be paid or that section 265 of the Assessment Act will apply in relation to any tax that may become so payable; and
(c) any other matters that the Commissioner considers relevant;
may grant the request or refuse the request.
(7) Subject to subsection (9), where a request made under subsection (1) in relation to a primary taxable amount (in this subsection referred to as the relevant taxable amount) is granted by the Commissioner, the following provisions have effect:
(a) in relation to each person making the request who is entitled to make the request apart from subsection (3):
(i) where the person is a prescribed person, then, for the purposes of the Assessment Act, but subject to section 128D of that Act and to the application of any relevant exempting provision:
(A) an amount equal to the amount specified in the request under paragraph (4)(b) or sub‑subparagraph (4)(c)(i)(B), as the case may be, in relation to the person shall be included in the assessable income of the person of the year of income to which the relevant taxable amount relates; and
(B) the amount shall be deemed to be included in that assessable income by virtue of subsection 97(1) of the Assessment Act and by reason that the person was presently entitled to a share of the primary trust income in relation to the relevant taxable amount; and
(ii) where the person is a company not being a prescribed person—an elected taxable amount shall be taken to exist, in relation to the year of income in relation to which the relevant taxable amount exists, of an amount equal to the amount specified in the request under paragraph (4)(b) in relation to the person;
(b) in relation to each person making the request by virtue of the application of subsection (3) in relation to a company:
(i) a company taxable amount shall be taken to exist, in relation to the year of income in relation to which the relevant taxable amount exists, of an amount ascertained by dividing the amount specified in the request under subparagraph (4)(c)(ii) in relation to the person in relation to the company by 0.486; and
(ii) for the purposes of the Assessment Act other than Division 7 of Part III and Division 4 of Part VI:
(A) the company shall be deemed to have paid to the person, as a shareholder in the company, a dividend of an amount equal to the amount specified in the request under subparagraph (4)(c)(ii) in relation to the person in relation to the company;
(B) the dividend shall be deemed to have been paid by the company, on the last day of the year of income to which the relevant taxable amount relates (whether or not the company existed at that time), out of profits derived by the company from sources in Australia; and
(C) the dividend shall be deemed not to be a dividend to which subsection 44(2) of the Assessment Act applies;
(c) the trustee in relation to whom the relevant taxable amount exists is not liable, and shall be deemed never to have been liable, to pay trust recoupment tax on the relevant taxable amount;
(d) any secondary taxable amount derived from the relevant taxable amount shall be deemed not to exist and never to have existed.
(8) Subject to subsection (9), where a request made under subsection (2) in relation to an elected taxable amount that exists in relation to a company is granted by the Commissioner, the following provisions have effect:
(a) a company taxable amount shall be taken to exist in relation to the company, in relation to the year of income in relation to which the elected taxable amount exists, of an amount equal to the elected taxable amount;
(b) for the purposes of the application of the Assessment Act, other than Division 7 of Part III, in relation to each person making the request:
(i) the company shall be deemed to have paid to the person, as a shareholder in the company, a dividend of an amount equal to the amount specified in the request under paragraph (4)(d) in relation to the person;
(ii) the dividend shall be deemed to have been paid by the company, on the last day of the year of income to which the elected taxable amount relates (whether or not the company existed at that time), out of profits derived by the company from sources in Australia; and
(iii) the dividend shall be deemed not to be a dividend to which subsection 44(2) of the Assessment Act applies;
(c) the company is not liable, and shall be deemed never to have been liable, to pay trust recoupment tax on the elected taxable amount.
(9) Where:
(a) a request made under this section in relation to a taxable amount is granted by the Commissioner; and
(b) after the request is granted, the taxable amount is increased or reduced;
subsections (7) and (8) have effect in relation to the request as if:
(c) the request had been made in relation to the increased or reduced taxable amount;
(d) the request had been made by such persons as the Commissioner determines, being some or all of:
(i) the persons who, but for subsections (3) and (5), would have been required to make the request;
(ii) the persons who, by virtue of subsection (3), could have been permitted to make the request; and
(iii) the persons whom the Commissioner considers should have been entitled under paragraph (5)(b) to make the request;
if the request had been made in relation to the increased or reduced taxable amount; and
(e) the amounts specified in the request in relation to those persons had been such amount or amounts as the Commissioner considers appropriate and, where applicable, those amounts had been specified in relation to the relevant company or relevant companies.
(10) In this section:
eligible person means a prescribed person or a company not being a prescribed person.
replacement company, in relation to a substitution request, means a company that is not a party to the request but would, but for subsection (3), be entitled to be a party to the request.
substitution request means a request under subsection (1) any of the parties to which is a party by virtue only of the application of subsection (3).
8
Liability to pay trust recoupment tax
8 Liability to pay trust recoupment tax
(1) Subject to this Act, where a primary taxable amount, an elected taxable amount or a company taxable amount exists in relation to a person, the person is liable to pay the tax imposed on that taxable amount by the Trust Recoupment Tax Act 1985.
(2) Subject to this Act, where a secondary taxable amount exists in relation to an eligible beneficiaries class, the persons included in that class are jointly and severally liable to pay the tax imposed on that amount by the Trust Recoupment Tax Act 1985.
9
Reduction of liability where tax paid
9 Reduction of liability where tax paid
(1) Where:
(a) trust recoupment tax is or was payable on a secondary taxable amount and trust recoupment tax is payable on the primary taxable amount by reference to trust recoupment tax on which the secondary taxable amount was ascertained; and
(b) an amount of trust recoupment tax on that primary taxable amount is paid;
there shall be deemed to be applied, or to have been applied, in reduction of the trust recoupment tax that is or was payable on the secondary taxable amount, an amount equal to the amount paid as mentioned in paragraph (b).
(2) Where:
(a) trust recoupment tax is or was payable on a primary taxable amount and trust recoupment tax is payable on a secondary taxable amount ascertained by reference to trust recoupment tax on the primary taxable amount; and
(b) an amount of trust recoupment tax on the secondary taxable amount is paid;
an amount equal to the amount paid as mentioned in paragraph (b) shall be deemed to be applied, or to have been applied, in reduction of the trust recoupment tax that is or was payable on the primary taxable amount.
(3) Where under this section an amount is deemed to be applied, or to have been applied, in reduction of the trust recoupment tax that is or was payable on a taxable amount, being trust recoupment tax that includes or included late payment tax, the amount shall, to the extent to which it does not exceed the amount of that late payment tax, be deemed to be applied, or to have been applied, in reduction of that late payment tax and the balance (if any) shall be deemed to be applied, or to have been applied, in reduction of the remaining trust recoupment tax.
(4) In this section, trust recoupment tax includes late payment tax and penalty tax.
10
Right of contribution and apportionment of liability
10 Right of contribution and apportionment of liability
(1) Where:
(a) the persons included in an eligible beneficiaries class are jointly and severally liable to pay trust recoupment tax on a secondary taxable amount; and
(b) a person included in that eligible beneficiaries class has paid any of that trust recoupment tax;
the person referred to in paragraph (b) may, in a court of competent jurisdiction, recover by way of contribution and as a debt from any of the other persons included in the class such part of the amount paid as the court considers just and equitable.
(2) Where proceedings against a person under Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953 for recovery of any trust recoupment tax payable on a secondary taxable amount are instituted in any court, the court may:
(a) on the application of the person, join, as co‑defendant or as co‑defendants in the proceedings, a specified person or specified persons who are included in the eligible beneficiaries class in relation to the secondary taxable amount; and
(b) having regard to:
(i) the amount or value of any benefit that each co‑defendant has derived, or might reasonably be expected to derive, being a benefit to which subsection 6(4) applies in relation to the person concerned in relation to the secondary taxable amount; and
(ii) any other relevant circumstances;
determine, on just and equitable grounds, the respective proportions of the amount of the trust recoupment tax that the co‑defendants are liable to pay.
(3) In this section trust recoupment tax includes late payment tax and penalty tax.
12
Penalty tax
12 Penalty tax
(1) Where:
(a) for the purpose of making an assessment, the Commissioner has calculated the trust recoupment tax that is assessable to a person or persons in relation to a taxable amount, not being a secondary taxable amount arising under subsection 6(3);
(b) the tax avoidance scheme to which the taxable amount relates was entered into after 28 April 1983 and before the commencement of this Act;
(c) the assessment is to be made in a quarter (in this subsection referred to as the assessment quarter) commencing after the end of the year of income that immediately succeeded the year of income to which the taxable amount relates; and
(d) the index number in relation to the quarter immediately preceding the assessment quarter exceeds the index number in relation to the March quarter of the year of income that immediately succeeded the year of income to which the taxable amount relates;
the person is liable or, in the case of persons included in an eligible beneficiaries class, the persons are jointly and severally liable, to pay, by way of penalty, additional tax equal to an amount ascertained in accordance with the formula View image in the official source where:
A is the amount of the trust recoupment tax referred to in paragraph (a);
B is the index number in relation to the quarter immediately preceding the assessment quarter; and
C is the index number in relation to the March quarter referred to in paragraph (d).
(2) Where:
(a) for the purpose of making an assessment, the Commissioner has calculated the income tax that is assessable to a person in relation to a year of income (in this subsection referred to as the relevant year of income);
(b) in the calculation of that income tax an amount was, or amounts were, included in the assessable income of the person by virtue of the application of section 7 in relation to a tax avoidance scheme or tax avoidance schemes entered into after 28 April 1983 and before the commencement of this Act;
(c) if the amount or amounts had not been included in the assessable income of the person:
(i) no income tax would have been assessable to the person in relation to the relevant year of income; or
(ii) there would have been assessable to the person in relation to the relevant year of income an amount of income tax (in this subsection referred to as the amount of claimed tax) that is less than the amount of the income tax referred to in paragraph (a);
(d) the assessment is to be made in a quarter (in this subsection referred to as the assessment quarter) commencing after the end of the year of income that immediately succeeded the relevant year of income; and
(e) the index number in relation to the quarter immediately preceding the assessment quarter exceeds the index number in relation to the March quarter of the year of income that immediately succeeded the relevant year of income;
the person is liable to pay, by way of penalty, additional tax equal to an amount ascertained in accordance with the formula View image in the official source
where:
A is:
(f) in a case to which subparagraph (c)(i) applies—the amount of the income tax referred to in paragraph (a); or
(g) in a case to which subparagraph (c)(ii) applies—the amount by which the amount of the income tax referred to in paragraph (a) exceeds the amount of claimed tax;
B is the index number in relation to the quarter immediately preceding the assessment quarter; and
C is the index number in relation to the March quarter referred to in paragraph (e).
(3) Where:
(a) for the purpose of making an assessment, the Commissioner has calculated the trust recoupment tax that is assessable to a person or persons in relation to a taxable amount, not being a secondary taxable amount arising under subsection 6(3); and
(b) the tax avoidance scheme to which the taxable amount relates was entered into after the commencement of this Act;
the person is liable or, in the case of persons included in an eligible beneficiaries class, the persons are jointly and severally liable, to pay, by way of penalty, additional tax equal to double the amount of the trust recoupment tax referred to in paragraph (a).
(4) Where:
(a) for the purpose of making an assessment, the Commissioner has calculated the income tax that is assessable to a person in relation to a year of income (in this subsection referred to as the relevant year of income);
(b) in the calculation of that income tax an amount was, or amounts were, included in the assessable income of the person by virtue of the application of section 7 in relation to a tax avoidance scheme or tax avoidance schemes entered into after the commencement of this Act; and
(c) if the amount or amounts had not been included in the assessable income of the person:
(i) no income tax would have been assessable to the person in relation to the relevant year of income; or
(ii) there would have been assessable to the person in relation to the relevant year of income an amount of income tax (in this subsection referred to as the amount of claimed tax) that is less than the amount of the income tax referred to in paragraph (a);
the person is liable to pay, by way of penalty, additional tax equal to:
(d) in a case to which subparagraph (c)(i) applies—double the amount of the income tax referred to in paragraph (a); or
(e) in a case to which subparagraph (c)(ii) applies—double the amount by which the amount of the income tax referred to in paragraph (a) exceeds the amount of claimed tax.
(5) Subject to subsection (6), if at any time, whether before or after the commencement of this section, the Australian Statistician has published or publishes an index number in respect of a quarter in substitution for an index number previously published by him or her in respect of that quarter, the publication of the later index number shall be disregarded for the purposes of this section.
(6) If at any time, whether before or after the commencement of this section, the Australian Statistician has changed or changes the index reference period for the Consumer Price Index, then, for the purposes of the application of this section after the change took place or takes place, regard shall be had only to the index numbers published in terms of the new index reference period.
(7) The Commissioner shall make an assessment of the additional tax payable by a person or persons under a provision of this section.
(8) Notice of an assessment made in respect of a person or persons under subsection (7) may be incorporated in notice of any other assessment made in respect of the person or persons under this Act or the Assessment Act.
(9) The Commissioner may, in the Commissioner’s discretion, remit the whole or any part of the additional tax payable by a person or persons under a provision of this section, but, for the purposes of the application of subsection 33(1) of the Acts Interpretation Act 1901 to the power of remission conferred by this subsection, nothing in this Act shall be taken to preclude the exercise of the power at a time before an assessment is made under subsection (7) of the additional tax.
(10) In this section, index number, in relation to a quarter, means the All Groups Consumer Price Index number, being the weighted average of the 8 capital cities, published by the Australian Statistician in respect of the quarter.
13
Arrangements etc. to avoid operation of Act
13 Arrangements etc. to avoid operation of Act
(1) Where:
(a) a scheme entered into or carried out by a person after 28 April 1983 would, but for this section, have the effect of in any way, directly or indirectly, defeating, evading or avoiding any liability of the person to pay trust recoupment tax; and
(b) it would be reasonable to conclude or infer that the person entered into or carried out the scheme for the purpose of in any way, directly or indirectly, defeating, evading or avoiding any liability of the person to pay trust recoupment tax or future trust recoupment tax;
then, in any prescribed recovery proceedings, the scheme shall be treated as being void in so far as it would, but for this section, have the effect mentioned in paragraph (a) but without prejudice to such validity as the scheme may have for any other purpose.
(2) Without limiting the generality of subsection (1), where:
(a) a person (in this subsection referred to as the taxpayer) is liable to pay an amount of trust recoupment tax to the Commissioner;
(b) after 28 April 1983, the taxpayer has transferred or transfers property to another person;
(c) the transfer would, but for this section, have the effect of rendering the taxpayer unable to pay the trust recoupment tax, or any part of the trust recoupment tax;
(d) having regard to:
(i) the manner and circumstances in which the transfer was made;
(ii) the nature of any connection (whether of a business, family or other nature) between the taxpayer and the other person referred to in paragraph (b); and
(iii) any other relevant circumstances;
it would be reasonable to conclude or infer that the transfer was made by the taxpayer for the purpose of rendering the taxpayer unable to pay the trust recoupment tax, a part of the trust recoupment tax or any future trust recoupment tax; and
(e) either of the following conditions is satisfied:
(i) the transfer was made by way of gift; or
(ii) having regard to the circumstances referred to in paragraph (d), it would be reasonable to conclude or infer that the person to whom the property was transferred believed or suspected that the transfer was made by the taxpayer for the purpose referred to in paragraph (d);
then, in any prescribed recovery proceedings, the transfer shall be treated as being void in so far as it would, but for this section, have the effect mentioned in paragraph (c) but without prejudice to such validity as the transfer may have for any other purpose.
(3) A reference in this section to a scheme being entered into or carried out or a transfer of property being made by a person for a particular purpose shall be read as including a reference to the scheme being entered into or carried out or the transfer being made, as the case may be, by the person for 2 or more purposes of which that particular purpose is the dominant purpose.
(4) In this section:
(a) a reference to a transfer of property by a person includes a reference to:
(i) the execution by the person of a charge on property of the person in favour of another person;
(ii) the incurring by the person of an obligation in favour of another person; and
(iii) any scheme that has the effect, directly or indirectly, of diminishing the value of any property of the person and increasing the value of the property of another person or persons; and
(b) a reference, in relation to a transfer of property to which paragraph (a) applies, to the person to whom the property was transferred is a reference to:
(i) in a case to which subparagraph (a)(i) applies—the person in whose favour the charge referred to in that subparagraph was executed;
(ii) in a case to which subparagraph (a)(ii) applies—the person in whose favour the obligation referred to in that subparagraph was incurred; and
(iii) in a case to which subparagraph (a)(iii) applies—the person, or any of the persons, referred to in that paragraph the value of whose property was increased by reason of the transfer.
(5) A reference in subsection (4) to a scheme that has the effect, directly or indirectly, of increasing the value of the property of a person includes a reference to a scheme that has the effect, directly or indirectly, that the person becomes the owner of property of which the person would not have been the owner but for the scheme, whether or not the property would have existed but for the scheme.
(6) A reference in this section to trust recoupment tax shall be read as including a reference to income tax payable by virtue of the operation of section 7 and a reference to future trust recoupment tax shall be read as including a reference to income tax that could reasonably have been expected by the person at the time when the scheme was entered into or carried out to become payable by the person after that time by virtue of the operation of section 7.
(7) In this section:
future trust recoupment tax, in relation to a person in relation to a scheme, means trust recoupment tax that could reasonably have been expected by the person at the time when the scheme was entered into or carried out to become payable by the person after that time.
prescribed recovery proceedings, in relation to trust recoupment tax, means:
(a) proceedings by the Commissioner or a Deputy Commissioner for recovery of the trust recoupment tax or part of the trust recoupment tax or of an amount that includes the trust recoupment tax or part of the trust recoupment tax;
(b) proceedings for enforcement of a judgment given in proceedings referred to in paragraph (a); or
(c) proceedings by a trustee within the meaning of the Bankruptcy Act 1966 or by a liquidator, being proceedings for the benefit of the Crown, the Commissioner or a Deputy Commissioner or for the benefit of persons including the Crown, the Commissioner or a Deputy Commissioner.
trust recoupment tax includes applied penalty tax, late payment tax and penalty tax.
14
Regulations
14 Regulations
The Governor‑General may make regulations, not inconsistent with this Act, prescribing matters:
(a) required or permitted by this Act to be prescribed; or
(b) necessary or convenient to be prescribed for carrying out or giving effect to this Act;
and, in particular, may make regulations prescribing penalties not exceeding a fine of 5 penalty units for offences against the regulations.
Source text: opening excerpt
Sourced from the Federal Register of Legislation (legislation.gov.au), CC BY 4.0.
1 Short title
1 Short title
This Act may be cited as the Trust Recoupment Tax Assessment Act 1985.
2 Commencement
2 Commencement
This Act shall come into operation on the day on which it receives the Royal Assent.
3 Interpretation
3 Interpretation
(1) In this Act, unless the contrary intention appears:
applied penalty tax means a penalty under Part 4‑25 in Schedule 1 to the Taxation Administration Act 1953 in relation to trust recoupment tax.
Assessment Act means the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997.
associate has the same meaning in relation to a person as that expression has in relation to a person in section 318 of the Assessment Act.
company does not include a company in the capacity of trustee of a trust estate.
company taxable amount, in relation to a person, means an amount that is a company taxable amount in relation to the person under section 7.
distribution of income means:
(a) in relation to a company in relation to a particular time—a distribution of income of the company of the year of income of the company in which that time occurred among the shareholders of the company at that time, being a distribution of income by payment of a dividend; and
(b) in relation to a trust estate in relation to a particular time—a distribution of income of the trust estate of the year of income of the trustee in which that time occurred among the beneficiaries of the trust estate at that time and the persons who could have become beneficiaries of the trust estate at that time by the exercise of a power of appointment by the trustee of the trust estate or by another person, being a distribution of income that is paid to, or applied for the benefit of, those persons as beneficiaries of the trust estate.
elected taxable amount, in relation to a person, means an amount that is an elected taxable amount in relation to the person under subsection 7(7).
eligible beneficiaries class, in relation to a secondary taxable amount, means the eligible beneficiaries class ascertained under section 6 in relation to that secondary taxable amount.
Allows primary taxable amounts to be moved up or aggregated among related trusts where interposed trust entitlements or holding trusts exist (s 5(2)-(3)).
Establishes "secondary taxable amounts" which arise in a number of circumstances (ceasing to exist trusts, transfers of beneficial interests or where unpaid tax on a primary taxable amount is unlikely to be recovered). Some secondary taxable amounts are the primary taxable amount itself (s 6(1)-(2)); others are calculated as unpaid tax multiplied by 2.22 (s 6(3)).
Implements a procedural request pathway enabling eligible persons (prescribed persons or companies) to ask the Commissioner to treat specified sums as assessable income (for beneficiaries) or to accept company/elected company amounts (including deemed dividends), thereby eliminating the trust recoupment tax liability of the trustee or company if the request is granted (s 7(1)-(9)).
Allocates liability: trustees (for primary, elected or company taxable amounts) and eligible beneficiaries (jointly and severally for secondary taxable amounts) are liable for tax imposed by the separate Trust Recoupment Tax Act 1985; the present Act governs assessment, allocation and remedies (s 8).
Provides rules for reduction of double exposure where tax is paid on related taxable amounts (s 9), contribution and apportionment rights between jointly liable beneficiaries (s 10), and detailed penalty tax regimes calculated differently depending on when the scheme was entered into relative to specified cut‑off dates (s 12).
Treats schemes entered into to defeat recovery rights and transfers made to render a taxpayer unable to pay as void for the purposes of prescribed recovery proceedings (s 13).
Permits regulations to carry the Act into effect and prescribes maximum regulatory penalties (s 14).
The Act is to commence on Royal Assent (s 2). Temporal thresholds are embedded in the statute: some provisions apply where schemes were entered into on or after 12 May 1982 (s 5(1)(c)), and penalty regimes distinguish schemes entered after 28 April 1983 and before commencement, and those entered after commencement (s 12(1), (3)). The Assessment Act and TAA provisions listed in s 4 are applied to trust recoupment taxation "in like manner, mutatis mutandis" unless a contrary intention appears (s 4(1)-(2)); the text of those provisions therefore determines many procedural consequences.
This description highlights the Act’s mechanism: it does not create a separate income tax base for trusts but instead uses deemed assessable income allocations, deemed dividends and strict deeming and liability rules to impose tax consequences (see s 5, s 7, s 8, s 9). It also creates an administratively significant request mechanism and substantial Commissioner discretion to grant, refuse or set terms for requests (s 7(6)).
Main concepts
The Act’s substantive structure rests on a small set of recurring legal concepts. Each operates by deeming, allocation or recharacterisation and triggers consequential liability under the Trust Recoupment Tax Act 1985 and Assessment Act rules applied by s 4.
Scheme and tax avoidance scheme (s 3(1), s 3(4)-(5))
Scheme is broadly defined (agreements, arrangements, plans, actions, unilateral schemes) (s 3(1)(a)-(b); s 3(2)). The tax avoidance test in s 3(4) is an explicit multi‑factor enquiry: manner of entry and carrying out; form and substance; timing and length of carrying out; the result under the Assessment Act absent s 100A and Part IVA; changes to financial positions; and other consequences. The statutory test is purposive, focusing on whether persons entered into or carried out the scheme for the dominant purpose of securing lower income tax liability (s 3(4)-(5)). The Act thus turns purposive and factual inquiry into the starting point for trigger events under later sections.
Primary taxable amount (s 5)
A primary taxable amount arises where a beneficiary had a vested and indefeasible interest in trust income of a year of income, but was not presently entitled to that income; the interest arose out of, or in consequence of, a tax avoidance scheme entered into on or after 12 May 1982; and the present value to the beneficiary of benefits derived because of that interest is less than 50% of the trust income (s 5(1)(a)-(e)). When these conditions are met, the beneficiary is deemed never to have been presently entitled to the relevant trust income for Assessment Act purposes other than ss 99 and 99A, and a primary taxable amount equal to the relevant amount of net trust income is taken to exist in relation to the trustee (s 5(1)(f)-(g)).
The Act also recognises interposed trusts and can shift a primary taxable amount to a head trust where the sub‑trust’s present entitlement or payment arose out of the relevant scheme (s 5(2)). Multiple primary taxable amounts are aggregated (s 5(3)). The Act contains a present value calculation rule and definitions governing increased amounts where the scheme post‑dates beneficiary status (s 5(4)-(7)). The present value formula is specified in s 5(5) and uses A (amount/value of benefit) and n (years between year end and benefit derivation) to discount future benefits.
Secondary taxable amount (s 6)
Secondary taxable amounts arise where a primary taxable amount exists and the trust ceased to exist (s 6(1)); where beneficial interests were sold in certain periods before assessment and the Commissioner considers it unreasonable that the trustee remain liable (s 6(2)); and where unpaid trust recoupment tax on a primary taxable amount is unlikely to be recovered or the trust ceased to exist with unpaid tax (s 6(3)). In the unpaid/unrecoverable case, a secondary taxable amount equals the unpaid trust recoupment tax multiplied by 2.22 (s 6(3)). Secondary taxable amounts are taken to exist in relation to an "eligible beneficiaries class" (s 6(1)-(3)).
Eligible beneficiaries class and prescribed persons (s 3; s 6)
"Eligible beneficiaries class" is the group of people ascertained under s 6 in relation to a secondary taxable amount. The Act also defines "prescribed person" categories (natural persons other than trustees, persons to whom relevant exempting provisions applied, trustees of provident/superannuation/retirement funds, and certain public companies for Division 7 purposes) (s 3(1) definitions). The Act excludes companies from the definition of company for trustee capacity (s 3(1) definition of company).
Elected taxable amount and company taxable amount (s 3; s 7)
"Elected taxable amount" is defined by s 7(7) (as a term used where a company becomes treated by a requesting shareholder/company construct). "Company taxable amount" is defined by s 7 and is the amount treated as existing for a company where requests are granted, carrying with it deemed dividend consequences (s 7(7)-(8)). The request procedure can convert trustee liability into company/shareholder assessability with deeming of dividends, and the Act prescribes that deemed dividends are treated as paid on the last day of the year and out of Australian profits, and that certain dividend concession exclusions apply (s 7(7)(b)(ii) and s 7(8)(b)(ii)-(iii)).
Request mechanism to eliminate trustee/company liability (s 7)
Persons who would have received parts of a hypothetical distribution (eligible persons, prescribed persons or companies) may request that the Commissioner apply this section, specifying amounts and satisfying timing rules (generally within 30 days of notice of assessment) (s 7(1)-(5)). The Commissioner may grant or refuse the request and must have regard to reasonableness of specified amounts, likelihood of collection, and relevant matters (s 7(6)). If granted, the trustee (or company) is relieved of trust recoupment tax liability and the specified persons are treated as having assessable income or as a company taxable amount existing; secondary taxable amounts from the relevant taxable amount are extinguished (s 7(7)-(9)). The Commissioner has discretion to allow substitution requests and to waive full compliance in special circumstances (s 7(3)-(5)).
Liability and sharing (s 8, s 10)
Primary/elected/company taxable amounts attract liability to pay trust recoupment tax by the person in relation to whom they exist (s 8(1)). Secondary taxable amounts create joint and several liability among the eligible beneficiaries class (s 8(2)). Where one beneficiary pays, the payer may seek contribution and apportionment in a court; courts may join co‑defendants and apportion liability having regard to benefits each derived (s 10(1)-(2)).
Penalties, late payment and applied penalty tax (s 3, s 12)
The Act defines "late payment tax" (general interest charge under Part IIA of TAA) and "applied penalty tax" (penalties under Part 4‑25 in Schedule 1 to TAA) for purposes of aggregation with trust recoupment tax (s 3). Section 12 distinguishes penalties for schemes entered into in different time windows: for schemes after 28 April 1983 and before commencement, penalty tax is calculated by a CPI‑indexed formula using index numbers (s 12(1)), while for schemes entered into after commencement the penalty is double the trust recoupment tax (s 12(3)). Parallel penalty rules apply for income tax assessments where s 7 has been applied (s 12(2), (4)). The Commissioner has power to assess and to remit penalty tax in whole or part (s 12(7)-(9)).
Anti‑avoidance treatment in recovery proceedings (s 13)
The Act provides that schemes entered into after 28 April 1983 which have the effect of defeating recovery of trust recoupment tax, and transfers made to render a taxpayer unable to pay, shall be treated as void in prescribed recovery proceedings (s 13(1)-(2)). This voiding applies in specified recovery contexts (Commissioner proceedings, enforcement of judgments, or trustee/liquidator proceedings for the benefit of the Crown or Commissioner) (s 13(7)).
Application of Assessment Act and TAA provisions (s 4)
By express enactment, many Assessment Act and TAA provisions apply to assessment and collection of trust recoupment tax "in like manner, mutatis mutandis," unless contrary intention appears (s 4(1)-(2)). The Act is also to be treated as part of the Assessment Act for purposes of s 14 of the Assessment Act (s 4(3)). The Act disapplies some confidentiality protections where disclosure is necessary for assessing liability to trust recoupment tax or identifying joint and several liability (s 4(4)). The Commissioner may amend assessments notwithstanding time limits where necessary to give effect to s 6(2) or s 7 (s 4(5)). Service on one jointly liable person is treated as service on all (s 4(9)-(10)).
Regulations and penalties (s 14)
The Governor‑General may make regulations not inconsistent with the Act and may prescribe penalties not exceeding 5 penalty units for regulatory offences (s 14).
These core concepts produce a statutory economy where deeming and recharacterisation (present entitlement, deemed dividends, shifting primary taxable amounts) translate tax avoidance findings into tax liabilities on trustees, beneficiaries or companies. The Act combines a mechanical set of deemings with significant administrative discretion (Commissioner decisions on requests and on when to create secondary taxable amounts).
Who it affects
This Act creates legal and practical consequences for several distinct groups. The source provisions identify who pays, who can act, who may be liable jointly, and who the Commissioner may treat as involved.
Trustees (s 3 definitions; s 5; s 8)
Trustees are the immediate point of assessment for primary taxable amounts. When a primary taxable amount exists in relation to a trustee of a trust estate, the trustee is taken to be liable to pay the tax imposed by the Trust Recoupment Tax Act 1985 on that taxable amount (s 5(1)(g); s 8(1)). Trustees can be relieved of liability if a request under s 7 is granted by the Commissioner (s 7(7)(c), (8)(c)).
Beneficiaries (s 3; s 5; s 6; s 8; s 10)
Beneficiaries whose vested and indefeasible interests arose out of tax avoidance schemes are a central class. Section 5 treats the beneficiary as never to have been presently entitled to relevant trust income for certain Assessment Act purposes when the statutory test is met (s 5(1)(f)). Beneficiaries (as members of an eligible beneficiaries class) are jointly and severally liable to pay trust recoupment tax on a secondary taxable amount (s 6(1)-(3); s 8(2)). Beneficiaries who are required to make or participate in requests (s 7) may be treated as having assessable income if the Commissioner grants the request (s 7(7)(a)(i)(A)).
Companies and shareholders (s 3; s 7; s 8)
Companies can be the subject of "elected taxable amounts" and "company taxable amounts". The request mechanism contemplates companies either as parties seeking relief (where companies are eligible persons) or as substitute parties where prescribed persons should be able to make requests with the Commissioner’s leave (s 7(2)-(3)). Where requests are granted in relation to companies, the company may be treated as having paid deemed dividends to persons making the request, with the company taxable amount taken to exist and the company relieved of trust recoupment tax liability on the elected taxable amount (s 7(7)(b), (8)(a)-(b), s 8(1)).
Prescribed persons (s 3; s 7)
The Act defines "prescribed persons" by category: natural persons other than trustees; persons to whom a relevant exempting provision applied; trustees of certain funds (provident, benefit, superannuation, retirement funds); and certain companies that are public companies for Division 7 purposes by reference to s 103A(2)(c)/(d) of the Assessment Act (s 3(1) definitions). Prescribed persons play roles in the request mechanism (s 7(2)-(5)) and in assessments.
Eligible beneficiaries class (s 6)
The eligible beneficiaries class for a secondary taxable amount includes persons who have derived, or might reasonably be expected to derive, a benefit that would not have been derived if the primary trust income had not been derived (s 6(4)). The class excludes certain benefits and transactions: benefits to which s 5(1)(f) applies (s 6(5)(a)), and benefits derived from arm's length transactions with non‑associates (s 6(5)(b)). The Commissioner is permitted to exclude persons not included in the class at the time of notice of assessment (s 6(6)).
The Commissioner (s 4; s 7; s 12; s 13)
The Commissioner decides whether to grant requests (s 7(6)), may determine later relevant distribution times if the Commissioner considers than an earlier time is inappropriate (s 3 definition of "relevant distribution time"), is empowered to assess penalty tax (s 12(7)), to remit penalty tax in whole or part (s 12(9)), and to determine whether it is unreasonable that trustees bear primary taxable amounts and thus convert them to secondary taxable amounts (s 6(2)(c)). The Commissioner also has powers under the Assessment Act and TAA applied by s 4.
Courts, trustees in bankruptcy and liquidators (s 10; s 13)
Courts have jurisdiction to adjudicate contribution claims between jointly and severally liable beneficiaries and to join co‑defendants in recovery proceedings, permitting apportionment based on benefits derived (s 10(1)-(2)). The s 13 voiding provisions operate in "prescribed recovery proceedings," which include proceedings by trustees under the Bankruptcy Act 1966 and liquidators for the benefit of the Crown or Commissioner (s 13(7)(c)).
Recipients of deemed dividends (s 7)
Where the request procedure applies, specified persons may be treated as having included specified amounts in assessable income by virtue of deemed present entitlement (s 7(7)(a)(i)(A)) or, in company substitution cases, as recipients of deemed dividends with specified deeming consequences in relation to source and timing (s 7(7)(b); s 7(8)(b)(ii)-(iii)).
Parties who transfer property (s 13)
Section 13 specifically targets persons who transfer property after 28 April 1983 to render themselves unable to pay trust recoupment tax. Such transfers may be treated as void in relevant recovery proceedings if made to defeat payment of tax (s 13(2)).
Who bears economic cost and who decides
Economically, trustees are the first legal obligors for primary taxable amounts (s 8(1)) but the Act creates multiple routes for the Commissioner to reallocate liability (s 6 secondary taxable amounts; s 7 requests converting trustee liability into beneficiary/shareholder assessability). Where secondary taxable amounts are created, beneficiaries bear joint and several liability (s 8(2)). The Commissioner decides whether secondary taxable amounts should be created in replacement of trustee liability in some factual circumstances (s 6(2)(c)). The Commissioner has substantial discretion in requests (s 7(6)) and remission of penalties (s 12(9)), so administrative decision‑making determines who ultimately bears tax burdens in many cases.
This schema concentrates initial legal obligation on trustees, but then creates a statutory mechanism by which liability can be shifted to beneficiaries or shareholders, subject to Commissioner discretion and judicial apportionment where contribution actions are brought. Notices served on one co‑liable person are treated as valid service on all (s 4(9)-(10)), accelerating practical enforcement against beneficiaries.
Key duties and rights
This Act sets out procedural duties for affected parties, statutory rights to seek recharacterisation and contribution rights between co‑liable persons. The principal duties and rights are statutory and derived from deeming rules and the application of Assessment Act/TAA procedures under s 4.
Duties to pay (s 8; s 3(6))
Trustees are liable to pay trust recoupment tax where a primary taxable amount, elected taxable amount or company taxable amount exists in relation to them (s 8(1)). Eligible beneficiaries are jointly and severally liable for secondary taxable amounts (s 8(2)). Trust recoupment tax that has been assessed is deemed payable notwithstanding that it has not become due and payable (s 3(6)), which creates an immediate legal obligation on assessment.
Duty to respond to assessments and to engage with Commissioner procedures (s 4; s 7)
The Assessment Act and TAA provisions applied by s 4 impose procedural duties such as responding to notices, lodging objections and appeals, and paying assessed amounts, in like manner as for income tax assessments (s 4(1)-(2)). A person who wishes the Commissioner to eliminate trustee/company liability may make a written request within statutory time limits (s 7(4)(e)). Requests must satisfy statutory content requirements, including specifying amounts and, in substitution requests, particular allocation calculations (s 7(4)(a)-(d)).
Rights to request elimination of trustee/company liability (s 7)
Eligible persons and prescribed persons may request that the Commissioner apply s 7 to eliminate trust recoupment tax on a taxable amount and to have specified amounts treated as assessable income or as company taxable amounts (s 7(1)-(2), s 7(4)). The Commissioner may grant or refuse a request but must consider specified factors, including the reasonableness of amounts specified, the likelihood that tax will be paid, and any other relevant matters (s 7(6)). If granted, a range of deemings follow: assessable income inclusion, creation of elected/company taxable amounts, relief of trustee/company liability and extinguishment of secondary taxable amounts (s 7(7)-(8)).
Right to contribution and apportionment (s 10)
A person in an eligible beneficiaries class who pays trust recoupment tax on a secondary taxable amount may sue any of the other persons in the class for contribution and recover a just and equitable part (s 10(1)). In recovery proceedings under the TAA, a court may join co‑defendants from the eligible beneficiaries class and apportion liability having regard to the benefits each co‑defendant has derived or might reasonably be expected to derive and any other relevant circumstances (s 10(2)). This statutory right to contribution channels economic allocation disputes into courts, allowing fact‑based apportionments based on derivation of benefits (s 10(2)(b)).
Disclosure and service rules (s 4)
Section 4(4) authorises disclosure of information that would otherwise be prohibited by certain confidentiality provisions in the TAA and Assessment Act to persons who are or likely to become liable to pay trust recoupment tax or income tax by virtue of s 7, and disclosure of identity and particulars of liability to joint and several obligors. Service of assessment notices on any one jointly liable person is deemed service on each person (s 4(9)-(10)). Those provisions change normal confidentiality dynamics and facilitate notice and information flows between Commissioner and potentially liable persons.
Rights to reduction where tax paid (s 9)
Where tax has been paid on related primary and secondary taxable amounts, the Act provides for deemed application of amounts paid to reduce liability (s 9(1)-(3)). Payments are applied first to late payment tax to the extent of such tax and then to remaining trust recoupment tax (s 9(3)). This reduces risk of double collection.
Right of managerial discretion and remission (s 12(9))
The Commissioner may remit penalty tax in whole or part and may exercise that power before an assessment is made (s 12(9)). This is an administrative right that the Commissioner may exercise situationally.
Rights and duties in relation to voiding arrangements and transfers (s 13)
The Act permits the Commissioner and Crown representatives to treat schemes or transfers entered into for the dominant purpose of defeating payment as void in prescribed recovery proceedings (s 13(1)-(2)). A person who has acquired property via such a transfer may find that transfer treated as void only for specified recovery litigation contexts, which affects rights of transferees insofar as those proceedings are pursued.
Obligations about accuracy and calculation (s 5; s 6)
Parties facing potential primary taxable amounts will need to calculate present values (s 5(5)), to understand whether derived benefits amount to less than 50% of trust income (s 5(1)(d)), and to ascertain whether a person is included in an eligible beneficiaries class (s 6(4)-(6)). Those are technical duties to quantify and document financial positions that can be relied upon in requests or in litigation.
Procedural duty to make assessments and notices (s 12(7)-(8))
The Commissioner must make assessments of the additional tax under s 12 and can incorporate such assessments into other notices. This creates an administrative duty to act under the penalty tax provisions.
Taken together, the Act imposes immediate payment liabilities on trustees and potential joint liabilities on beneficiaries, offers a statutorily designed relief route via s 7 subject to Commissioner discretion and strict time limits, and gives payers a route to contribution. It also imposes recordkeeping and quantification duties since primary taxable amounts and secondary taxable amounts are numerically defined by reference to net trust income, present value calculations and multipliers.
Penalties and enforcement
This Act provides a layered enforcement architecture combining assessment mechanisms borrowed from the Assessment Act/TAA (s 4), financially penal outcomes (s 12), administrative remissions (s 12(9)), deeming of transfers or schemes as void in recovery litigation (s 13), and regulatory penalties via made regulations (s 14). The Act defines late payment tax and applied penalty tax to ensure collection tools and interest/penalty overlay for non‑payment (s 3 definitions; s 4(7)).
Penalty tax regimes (s 12)
Section 12 creates specific additional tax ("penalty tax") in different temporal circumstances:
For schemes entered into after 28 April 1983 and before the Act’s commencement, where the assessment occurs in a quarter after the year immediately succeeding the relevant year of income and CPI index numbers have changed, the penalty is calculated by an index formula using A (assessable trust recoupment tax amount), B (index number in relation to the quarter immediately preceding the assessment quarter) and C (index number in relation to the March quarter of the year of income that immediately succeeded the relevant year) (s 12(1)). The Act defines "index number" as the All Groups Consumer Price Index number (weighted average of the eight capital cities) published by the Australian Statistician (s 12(10)).
For income tax assessments where s 7 has been used to include amounts in assessable income and where s 7 was applied because of schemes entered after 28 April 1983 and before commencement, a comparable index‑based penalty calculation applies (s 12(2)).
For schemes entered into after commencement, the penalty for trust recoupment tax is double the amount of the trust recoupment tax (s 12(3)).
For income tax assessments determined by s 7 arising from schemes entered into after commencement, the penalty is likewise double the income tax amount or double the excess over claimed tax (s 12(4)).
The Commissioner must make assessments of additional tax under s 12(7) and may incorporate notice of such an assessment into other assessment notices under this Act or the Assessment Act (s 12(8)). The Commissioner also has a discretionary power to remit part or all of the additional tax and may exercise that power even before a formal assessment (s 12(9)). This mixes mandatory assessment with administrative flexibility.
Late payment tax and applied penalty tax (s 3; s 4(7))
The Act defines late payment tax as the general interest charge under Part IIA of the TAA and applied penalty tax as a penalty under Part 4‑25 in Schedule 1 to the TAA (s 3 definitions). It treats late payment tax and applied penalty tax as part of "tax" for many purposes, and requires that any deemed reductions after payments apply first to late payment tax then to remaining trust recoupment tax (s 9(3); s 4(7)). Using TAA collection powers therefore brings interest accrual and TAA penalty framework to bear.
Voiding of schemes and transfers in recovery proceedings (s 13)
Where a person has entered into a scheme or transferred property after 28 April 1983 for the purpose of defeating liability to pay trust recoupment tax, the scheme or transfer may be treated as void in prescribed recovery proceedings (s 13(1)-(2)). The Act lists factors to consider in concluding purpose (manner and circumstances of transfer, connections, other circumstances) (s 13(2)(d)). Transfers by way of gift and transfers where the transferee suspected a purpose to defeat payment are explicitly captured (s 13(2)(e)). The voiding applies only in prescribed recovery proceedings (s 13(7)). This creates a litigation remedy: the Commissioner or other recovery actor can disregard transfers in enforcement contexts and can recover value accordingly.
Administrative enforcement and information flows (s 4)
The Act applies Assessment Act and TAA procedures to trust recoupment tax "in like manner, mutatis mutandis" (s 4(1)). It specifically removes certain secrecy barriers for necessary disclosure to persons who are or are likely to become liable to pay trust recoupment tax or income tax by virtue of s 7, or to jointly and severally liable persons (s 4(4)). This facilitates enforcement and recovery by enabling the Commissioner to share relevant information with potentially liable persons and identify co‑liable parties. Service rules are adapted so that service on one co‑liable person is effective against all (s 4(9)-(10)).
Court enforcement and contribution (s 10)
Courts can be used to recover tax and to apportion liability among co‑liable beneficiaries. A paying beneficiary can sue others for contribution (s 10(1)). In proceedings for recovery under Part 4‑15 of the TAA, courts may join co‑defendants and apportion based on quantified or expected benefits and other circumstances (s 10(2)). This produces a judicial backstop for equitable apportionment in multi‑party liability scenarios.
Regulatory penalties (s 14)
Regulations may prescribe offences and penalties not exceeding 5 penalty units for breaches of the regulations (s 14). These are ancillary enforcement instruments and may be used for procedural or compliance contraventions.
Remission discretion (s 12(9))
The Commissioner’s discretion to remit additional tax in whole or in part, and to do so before formal assessment, allows administrative tailoring of penalty outcomes. However, the power’s availability is subject only to the statutory structure and is not unbounded; the Act preserves exercise timing before assessment for s 33(1) of the Acts Interpretation Act 1901 application (s 12(9)).
Practical enforcement consequences and timing
Assessments of trust recoupment tax are subject to the Assessment Act and TAA rules applied by s 4, which means reassessment, objection, review and collection processes from those statutes govern disputes and enforcement (s 4(1)-(3)). Time limits for making requests under s 7 are tight (generally 30 days after notice of assessment) (s 7(4)(e)), and secondary taxable amounts can be created where trusts cease to exist or interests are sold in the relevant period before notice of assessment (s 6(1)-(2)). These features make prompt administrative action important to limit enforcement escalation.
In sum, the Act combines statutory deeming and recharacterisation to trigger liabilities with a penalty regime that escalates based on when the scheme was entered into. The Commissioner has strong powers to enforce, disclose, assess and remit, while courts retain roles in contribution and apportionment and prescribed recovery proceedings permit targeted voiding of avoidance devices.
How it interacts with other laws
The Act is structured to operate within, and by reference to, the broader Australian federal taxation legal framework. It expressly imports many provisions of the Income Tax Assessment Acts and the Taxation Administration Act 1953 and interacts substantively with provisions from those Acts and with insolvency law. The statutory cross‑references determine much of its practical operation.
Application of Assessment Act and TAA (s 4)
Section 4(1) provides that, unless a contrary intention appears, specific parts and provisions of the Assessment Act (sections 6 and 7A, Part II, section 21, Part IV, section 204, and Parts VII and VIII) and of the TAA (Part IIA and Part 4‑15 in Schedule 1) and regulations made under those Acts "apply for the purposes of the assessment and collection of trust recoupment tax and penalty tax, in like manner, mutatis mutandis, as those provisions apply for the purposes of the assessment and collection of income tax." This means that the framework for assessment, objection, review, amendment and collection that applies to income tax largely applies to trust recoupment tax as well, unless the Trust Recoupment Tax Assessment Act indicates otherwise.
By s 4(2), references in this Act to provisions of the Assessment Act or the TAA are to be read as references to those provisions in their application to this Act, in accordance with s 4(1). Section 4(3) deems the Act to be part of the Assessment Act for the purposes of s 14 of that Act.
Overrides of confidentiality and service rules (s 4)
The Act modifies the confidentiality regime: s 4(4) authorises disclosures otherwise prevented by s 355‑25 or 355‑155 of Schedule 1 of the TAA and by s 170 of the Assessment Act where necessary to assess or collect trust recoupment tax or to identify joint liability. This creates a statutory bridge to share information that would otherwise be protected for specific purposes related to trust recoupment tax.
Service of notices is treated for jointly and severally liable persons as effective on all persons when served on one, facilitating enforcement (s 4(9)). Section 4(10) makes assessments valid even if notices identify only some members of the eligible beneficiaries class.
Interaction with income tax provisions , deeming present entitlement and dividends (s 5; s 7)
Section 5 alters present entitlement treatment for beneficiaries in specific anti‑avoidance circumstances, declaring the beneficiary not, and never to have been, presently entitled to the relevant trust income for Assessment Act purposes other than ss 99 and 99A (s 5(1)(f)). This creates a statutory exception to normal present entitlement rules under the Assessment Act.
Section 7 creates deeming consequences in relation to assessable income and company dividends. Where a request is granted, amounts specified in the request can be included in assessable income as being included by virtue of subsection 97(1) of the Assessment Act and by reason of present entitlement (s 7(7)(a)(i)(A)). In company substitution cases the company is deemed to have paid dividends on the last day of the year from Australian profits and the dividend is expressly treated as not being a dividend to which subsection 44(2) of the Assessment Act applies (s 7(7)(b)(ii)-(iii); s 7(8)(b)(ii)-(iii)). These deemings interface directly with the Assessment Act’s dividend imputation and Part III Division 7 frameworks.
Interaction with Division 7 and public company tests (s 3; s 7)
The definition of prescribed person includes companies that are public companies for Division 7 purposes by reference to paragraphs 103A(2)(c) or (d)(i), (iii) or (iv) of the Assessment Act (s 3(1) definition). Section 7’s company substitution and deemed dividend rules expressly carve out Division 7 and Division 4 of Part VI applications for some deemings (s 7(7)(b)(ii) and s 7(7)(b)(iii)). This indicates the Act anticipates interactions with company dividend and shareholder loan rules within the Assessment Act.
Interaction with TAA penalty and interest regimes (s 3; s 4)
Sections defining "applied penalty tax" and "late payment tax" rely on TAA definitions and procedures (s 3). Section 4(1) applies Part IIA of the TAA (general interest charge) and Part 4‑15 (recovery) so that late payment interest and recovery procedures under the TAA apply to trust recoupment tax. The Act therefore sits on top of TAA collection and enforcement mechanics.
Interaction with insolvency law and recovery by trustees and liquidators (s 13)
Section 13(7) expressly includes proceedings by a trustee in bankruptcy under the Bankruptcy Act 1966 and proceedings by liquidators as prescribed recovery proceedings in which schemes/transfers to defeat tax may be treated as void. This means creditor recovery, insolvency administrations and the Commissioner’s pursuit of voidable transfer remedies are linked by the Act.
Temporal cross‑legality (s 5; s 12; s 13)
The Act uses temporal cut‑offs that interact with substantive consequences: s 5(1)(c) refers to schemes entered into on or after 12 May 1982; s 12 treats penalties differently for schemes entered after 28 April 1983 and before commencement and for those entered after commencement (s 12(1), (3)); s 13 uses the 28 April 1983 date for voiding provisions (s 13(1)-(2)). These dates will interact with the historical facts of arrangements and require precise factual determinations where schemes straddle or pre‑date the cut‑offs.
Deeming of Act as part of the Assessment Act (s 4(3))
For certain purposes, this Trust Recoupment Tax Assessment Act is to be treated as part of the Assessment Act. This legal incorporation means that the Assessment Act’s interpretive, procedural and substantive machinery applies to trust recoupment taxation in ways that can affect objection, appeal, amendment and other legal routes (s 4(3)).
Limits and qualifications
The importation of Assessment Act/TAA provisions is qualified by "unless the contrary intention appears" in this Act (s 4(1)). Where the Trust Recoupment Tax Assessment Act provides its own rule (for example, special deeming rules in s 5 and s 7), that rule prevails over the general application of Assessment Act provisions. The Act also expressly preserves certain Assessment Act rules from being overridden in particular ways, for example by excluding some dividend provisions in s 7 deemings.
In practical terms, the Act is designed to be read and applied within the ordinary tax administration and litigation framework established by the Assessment Act and the TAA, with targeted statutory adjustments and deemings to capture trust‑based tax avoidance and ensure recovery of tax by reallocating liabilities and declaring transfers void in specified recovery contexts.
Amendment history
The provided text contains no formal schedule of amendments or notation of historical legislative changes. The Act itself embeds chronological thresholds and temporal references which are legislative features rather than an amendment log. The following temporal features appear in the text and are part of the substantive operation of the Act:
Commencement: The Act comes into operation on the day it receives Royal Assent (s 2). No amended commencement dates or transitional provisions beyond those contained in substantive sections are present in the text provided.
Pre‑enactment temporal thresholds used in substantive rules:
Section 5(1)(c) conditions primary taxable amounts on tax avoidance schemes entered into on or after 12 May 1982; that date is invoked as the lower temporal boundary for the operation of certain primary taxable amount rules.
Sections 12(1) and 13(1)-(2) use 28 April 1983 as a threshold date for the special penalty calculation and for the provisions treating avoidance arrangements and transfers as void in specified recovery proceedings. Section 12 segregates penalty treatment between schemes entered after 28 April 1983 and before commencement, and those entered after commencement.
The Act repeatedly cross‑references provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997, and of the TAA, describing them as applicable "in like manner, mutatis mutandis" (s 4(1)). Any subsequent amendments to those Acts will affect how trust recoupment tax is administered because s 4(2) requires reading references as those provisions apply in relation to this Act.
The Act contains express savings or deeming provisions (for example, s 5(8) allows a primary taxable amount to be taken to exist notwithstanding that the trust has ceased to exist). Those appear as substantive permanences not requiring transitional amendment.
Regulatory power: s 14 allows the Governor‑General to make regulations necessary to carry the Act into effect; such regulations can amend the operational detail of the Act without primary legislation and can prescribe low‑level penalties (up to 5 penalty units). The text provided does not include any regulations or mention of amended regulatory instruments.
Because the source text contains no explicit amendment history, legislative instrument citations, or repeal/replacement notes, an expert relying solely on this text must treat the Act as presented and note that further amendments, interpretive determinations or subsequent regulations (including any changes to the Assessment Act or TAA that are applied mutatis mutandis) would alter its application. The Act itself relies on external dates and external statutory frameworks which may have since been amended; those changes are not evidenced within the provided statutory text.
Practically, the Act’s embedded dates (12 May 1982 and 28 April 1983) are operative within its substantive provisions and affect scope and penalty outcomes (s 5; s 12; s 13). Any practitioner should verify whether later amendments or disallowable legislative instruments (regulations) have been made under s 14 to implement or clarify procedural requirements, but such instruments are not contained in the text supplied.
Litigation history
The statutory text supplied does not include any case law, reported decisions, or references to litigation outcomes. It contains no judgments, no examples of judicial interpretation, and names no cases. As such, based solely on the instrument provided, there is no litigation history recorded in the statute.
From the content of the Act, litigation risk is nevertheless visible as an implied consequence because:
Courts are expressly given roles in contribution and apportionment claims among jointly liable beneficiaries (s 10(1)-(2)), which implies future disputes on factual apportionment will be litigated.
The Act contemplates "prescribed recovery proceedings" where schemes or transfers may be treated as void (s 13(1)-(2), (7)), so litigation in recovery contexts is an anticipated enforcement pathway.
The Act imports Assessment Act/TAA assessment, objection and appeal procedures (s 4(1)), so disputes about determinations under this Act will follow the objection and merits review or judicial review pathways applicable to tax assessments generally (as applied mutatis mutandis).
Because the statute creates factual and discretionary determinations,the existence of a tax avoidance scheme under s 3(4), the Commissioner’s discretion to grant requests under s 7(6), the Commissioner’s opinion as to unreasonableness in s 6(2)(c), and questions about present entitlement and present value calculation in s 5,these will be natural subjects of litigation. However, the text contains no recorded decisions or litigation examples.
Users of this analysis must therefore treat litigation history as absent in the provided source and should seek external case law databases and the administrative records of the Commissioner to understand how courts and tribunals have interpreted and applied the Act in practice.
Gotchas
The Act contains numerous provisions that can produce unexpected legal and practical outcomes if overlooked. These "gotchas" are concrete mechanics in the text that create potential traps for trustees, beneficiaries, companies and advisors.
Broad definition of "scheme" and purposive tax avoidance test (s 3(1), s 3(4)-(5))
The statutory definition of scheme is expansive (agreements, arrangements, unilateral plans, acts or courses of conduct) and the tax avoidance test considers manner, form and substance, timing, results under the Assessment Act absent s 100A/Part IVA, financial position changes and other consequences (s 3(1); s 3(4)). Practitioners cannot rely on narrow technical form if the substance and consequences indicate an avoidance purpose. The dominant purpose test in s 3(5)(b) allows multi‑purpose conduct to be caught where avoidance is the dominant purpose.
Beneficiary deemed never to have been presently entitled (s 5(1)(f))
Where the primary taxable amount test is met, the beneficiary is deemed not to be, and never to have been, presently entitled to the relevant trust income for Assessment Act purposes other than ss 99 and 99A (s 5(1)(f)). This retroactive recharacterisation can have cascading tax consequences and unexpected application dates, including implications for prior assessments and offsets.
Present value threshold of less than 50% (s 5(1)(d); s 5(5))
The primary taxable amount trigger depends on the present value of benefits to the beneficiary being less than 50% of relevant trust income (s 5(1)(d)). Practically, this requires discounted cash‑flow calculations and choice of discounting assumptions; the Act prescribes a formulaic approach in s 5(5) but the details can be technically complicated. Miscalculations can flip whether a primary taxable amount exists.
Secondary taxable amount multiplier 2.22 where unpaid and unlikely to be recovered (s 6(3))
If unpaid trust recoupment tax on a primary taxable amount is unlikely to be paid or the trust ceases with unpaid tax, a secondary taxable amount equal to the unpaid tax multiplied by 2.22 is created against the eligible beneficiaries class (s 6(3)). This multiplier significantly amplifies the nominal unpaid tax exposure for beneficiaries and can produce large unexpected liabilities if the trustee fails to pay.
Eligible beneficiaries class is factually expansive but has exclusions (s 6(4)-(5))
The eligible beneficiaries class includes those who have derived, or might reasonably be expected to derive, benefits that would not have been derived but for the primary trust income (s 6(4)). However, benefits excluded include those to which s 5(1)(f) applies and arm’s length transactions with non‑associates (s 6(5)). Determining membership requires careful fact analysis and record evidence; the Commissioner’s view will matter.
Tight time limits and content requirements for requests (s 7(4)(e); s 7(4)(b)-(d))
Requests to eliminate trustee/company liability must be in writing and generally lodged within 30 days after service of a notice of assessment (s 7(4)(a), (e)). Requests must specify amounts in particular ways and substitution requests have special allocation rules (s 7(4)(b)-(c)). Failure to meet these requirements can forfeit the opportunity to convert tax exposure from trustee to persons lower in the distribution chain.
Commissioner discretion in granting requests and waiver (s 7(6), (5))
The Commissioner may refuse requests and considers reasonableness of amounts, likelihood of tax payment, and other matters (s 7(6)). The Commissioner can waive full compliance in special circumstances (s 7(5)), but that is discretionary. The availability of relief therefore depends on administrative outcomes, not a catalogue of objective rights.
Deemed dividends and carve‑outs (s 7(7)(b)(ii)-(iii); s 7(8)(b)(ii)-(iii))
Where company substitution operates, the company is deemed to have paid dividends on the last day of the year out of Australian profits, and such dividends are deemed not to be dividends to which s 44(2) of the Assessment Act applies (s 7(7)(b)(ii)-(iii)). That has implications for dividend characterisation, imputation and other Division 7 Part III consequences, and practitioners must check how these deemed dividends interact with other tax features.
Joint and several liability plus service rules (s 8(2); s 4(9)-(10))
Secondary taxable amounts create joint and several liability across the eligible beneficiaries class (s 8(2)). Service of a notice on any one jointly liable person is deemed service on all (s 4(9)), and notices identifying only some class members do not invalidate assessment (s 4(10)). This means a single served recipient may find themselves facing full enforcement actions, and contribution disputes will be necessary later.
Commissioner’s power to treat schemes/transfers as void only in prescribed recovery proceedings (s 13(1)-(2), (7))
The voiding of schemes or transfers uses the vehicle of prescribed recovery proceedings (s 13(7)). This does not necessarily make transfers void in all contexts; the remedy is targeted to recovery litigation. Affected parties may find that their transfers remain effective outside recovery litigation but are vulnerable in enforcement actions.
Penalty tax variability with indexation and doubling (s 12)
Penalty calculation changes based on when schemes were entered into. For schemes entered after 28 April 1983 but before commencement, penalties are calculated by an index formula using CPI index numbers (s 12(1)). For schemes entered into after commencement, penalty tax is double the trust recoupment tax (s 12(3)). Practitioners must be precise about entry dates to forecast penalty exposure.
Deemed payment application order (s 9(3))
Where an amount paid is deemed applied in reduction and that amount includes late payment tax, the deemed application reduces late payment tax first to the extent of that tax then the balance is applied to remaining trust recoupment tax (s 9(3)). This ordering affects the residual principal and interest exposure for payers and contributors.
Records and evidence burden
The Act’s fact‑sensitive triggers (present entitlement, present value, benefit derivation, reasonableness of payment likelihood) imply a recordkeeping burden. Documents proving arm's length dealings, timing of entitlements, valuation and discounting inputs will be crucial in assessments, requests and court battles (s 5; s 6; s 7(6)).
Regulatory penalties under s 14
Regulations may impose extra procedural offences with penalties up to 5 penalty units (s 14). While modest, these attract additional compliance obligations that may be unfamiliar to taxpayers accustomed only to income tax reporting.
Each of these features is anchored in the statutory text and can produce sharp financial or procedural consequences. The unknowns arise from discretionary decision points (Commissioner opinions, grants/refusals, unreasonableness determinations), fact determinations (present value, benefit derivation) and timing (dates of scheme entry and assessments).
How to comply
Compliance under this Act requires a combination of preventive structuring, careful recordkeeping, prompt administrative responses, and preparedness to engage with the Commissioner’s discretion or litigate contributions. The Act itself prescribes several specific compliance‑relevant actions and deadlines.
Establish and retain contemporaneous records evidencing the nature, timing and commercial substance of arrangements (s 3(4); s 5; s 6)
Because the Act’s tax avoidance test is multifactorial (manner of carrying out, form and substance, timing, results under the Assessment Act absent s 100A/Part IVA, changes in financial position and other consequences) (s 3(4)), retain documentation showing commercial purpose, arm’s length terms, economic outcomes to parties, and any non‑tax objectives. Records that demonstrate substance over form will be useful if the Commissioner or a court evaluates whether a scheme was entered into for a dominant tax avoidance purpose.
Record distribution timing and present entitlement evidence (s 3 definition of "relevant distribution time"; s 5(1)(a), (f))
Establish and keep evidence of when beneficiaries had vested and indefeasible interests, when present entitlements arose or were purported, and why a beneficiary was or was not presently entitled (s 5(1)(a)-(b)). The "relevant distribution time" for taxable amounts is statutorily defined and can be the time immediately before entry into the scheme (or a later time the Commissioner determines) (s 3 definition). Accurate timing records are essential to opposing primary taxable amount findings or to preparing a request.
Compute present value rigorously and document assumptions (s 5(1)(d); s 5(5))
The 50% present value threshold for primary taxable amounts is a numerically precise test (s 5(1)(d)). The Act requires a present value calculation where benefits are future‑dated (s 5(5)). Perform careful discounted cash flow computations using the formula specified in s 5(5) and retain the input data (A and n, and any discounting assumptions consistent with the statutory approach). In contentious cases be prepared to justify discount rates and timing assumptions under the Act’s prescribed parameters.
Monitor trust existence, transfers of beneficial interests and timing around assessments (s 6(1)-(3), s 4(9)-(10))
Secondary taxable amounts arise in material ways where trusts cease to exist or beneficial interests are sold during relevant periods and before notices of assessment (s 6(1)-(2)). Trustees and advisors should monitor and, where possible, avoid disposing of beneficial interests or winding up trusts in the critical window between scheme entry and assessment notifications. If trust winding up or beneficial interest sales are contemplated, obtain tax advice on timing relative to potential assessments.
Manage payment risk to avoid secondary taxable amounts by trustees (s 6(3))
The Act creates an amplified secondary taxable amount (unpaid tax × 2.22) if unpaid trust recoupment tax is unlikely to be recovered (s 6(3)). Trustees should take steps to pay assessed tax when it is prudent, or to establish security or payment plans acceptable to the Commissioner, to reduce the risk that the Commissioner will create a secondary taxable amount against beneficiaries. Make arrangements with the Commissioner where feasible to avoid the 2.22 multiplier consequence.
If assessed, consider a s 7 request quickly and strictly observe form and timing (s 7(4)(e))
Requests under s 7 must be lodged quickly,generally within 30 days after service of a notice of assessment (s 7(4)(e)). Requests must be in writing, signed, and specify amounts in the formats statutorily required (s 7(4)(a)-(d)). For company substitution or complex interposed trust situations, the request content is technical (s 7(4)(c)). Ensure counsel and tax advisors prepare requests that show reasonableness of specified amounts and provide supporting documents demonstrating that amounts reflect what persons would have received absent the scheme.
Prepare for Commissioner discretion (s 7(6); s 6(2)(c))
The Commissioner may refuse a request or may permit substitutions or waivers in special circumstances (s 7(5)-(6)). Be ready to address the factors the Commissioner must consider: reasonableness of specified amounts, likelihood of collection, and any other relevant matters (s 7(6)). This involves presenting evidence on expected assessable income, payment security, and commercial reality to persuade the Commissioner to grant a request.
If joint and several liability arises, plan contribution strategies and preserve evidence (s 8(2); s 10(1)-(2))
If a secondary taxable amount is created, beneficiaries become jointly and severally liable (s 8(2)). A paying beneficiary can seek contribution or apportionment in court (s 10(1)-(2)). Keep records proving the quantum of benefits each person actually derived and contemporaneous commercial allocations to support later claims for contribution; prepare to litigate apportionment if necessary.
Anticipate and calculate penalty exposures (s 12)
Penalty tax varies by scheme entry date. Determine the relevant entry date to estimate penalty exposure: pre‑commencement (after 28 April 1983) penalties use an index formula (s 12(1), (2)); post‑commencement penalties are set at double the trust recoupment tax or double the excess where income tax inclusion via s 7 occurs (s 12(3), (4)). Factor likely penalties into financial planning and consider seeking remission where appropriate (s 12(9)).
Be aware of limited secrecy and disclosure exceptions (s 4(4))
The Commissioner may disclose information to persons who are or likely to become liable to pay trust recoupment tax or to pay income tax by operation of s 7, and may disclose identity and particulars of co‑liable persons (s 4(4)). Trustees and beneficiaries should expect information sharing that facilitates recovery and may require prior consent or protective measures only where permitted under the law.
Consider pre‑emptive structuring and independent arms‑length evidence (s 6(5)(b))
The Act excludes benefits derived from arm’s length dealings between non‑associates from the eligible beneficiaries class in some circumstances (s 6(5)(b)). Document contractual terms demonstrating arm’s length pricing and independent negotiation, and preserve valuation evidence. This can be a line of defence for persons who would otherwise be included in an eligible beneficiaries class.
When reorganising or transferring property, document commercial reasons and avoid transfers that can be characterised as gifts to defeat tax (s 13(2))
Transfers made after 28 April 1983 may be treated as void in prescribed recovery proceedings if they were made to render the transferor unable to pay trust recoupment tax, especially where transfers are gifts or the transferee believed the transfer was for that purpose (s 13(2)(e)). Document commercial reasons, independent valuations and contemporaneous evidence of consideration to rebut inferences of purpose.
Engage counsel early for disputes and for preparation of requests (s 7(6); s 10(2))
The Commissioner’s discretion and the likely court involvement in apportionment or recovery mean early legal input is essential. Preparation of requests under s 7, defence against primary taxable amount findings, and strategies for contribution litigation require legal and tax expertise.
Monitor regulatory instruments and Assessment Act/TAA changes (s 4(1); s 14)
Because the Act applies many Assessment Act and TAA provisions mutatis mutandis, post‑enactment changes to those Acts or to regulations made under s 14 may affect procedural rights or liabilities. Keep updated on any regulations made under s 14 and on relevant amendments to the Assessment Act and TAA.
Implementing these steps requires coordination between trustees, advisers, tax counsel and accountants. The statutory architecture produces multiple decision points where administrative judgment, precise timing and numerical computations matter. Early documentation of commercial purpose, arm’s length evidence, and financial computations will reduce the risk of primary or secondary taxable amounts and facilitate favourable Commissioner decisions on requests or judicial apportionment if required.
late payment tax means general interest charge under Part IIA of the Taxation Administration Act 1953 in relation to trust recoupment tax, applied penalty tax or penalty tax.
penalty tax means additional tax payable under section 12.
person includes a company and a person in the capacity of trustee of a trust estate.
prescribed person, in relation to a taxable amount, means:
(a) a natural person other than a person in the capacity of trustee of a trust estate;
(b) a person (other than a person referred to in paragraph (c)) in respect of whom a relevant exempting provision applied in relation to the year of income to which the taxable amount relates;
(c) a person in the capacity of trustee of a trust estate, being a trust estate that is a provident, benefit, superannuation or retirement fund; or
(d) a company that is, by virtue of the application of paragraph 103A(2)(c) or subparagraph 103A(2)(d)(i), (iii) or (iv) of the Assessment Act, a public company for the purposes of Division 7 of Part III of that Act in relation to the year of income to which the taxable amount relates.
primary taxable amount, in relation to a person, means an amount that is a primary taxable amount in relation to the person under section 5.
primary trust income, in relation to a primary taxable amount that exists in relation to the trustee of a trust estate, means the income or the part of the income of the trust estate to which the primary taxable amount is attributable.
property includes:
(a) a chose in action;
(b) any estate, interest, right or power, whether at law or in equity, in or over property; and
(c) any right to receive income.
relevant distribution time, in relation to a taxable amount that exists in relation to a company or the trustee of a trust estate, means:
(a) if the company or trust estate did not exist immediately before the tax avoidance scheme to which the taxable amount relates was entered into—the time when the company or trust estate commenced to exist; or
(b) in any other case—the time immediately before the time when the tax avoidance scheme to which the taxable amount relates was entered into;
or, if the Commissioner is of the opinion that that time is inappropriate, such later time as the Commissioner determines.
relevant exempting provision has the same meaning as in Division 9C of Part III of the Assessment Act.
right to receive income means a right of a person to have income that will or may be derived (whether from property or otherwise) paid to, or applied or accumulated for the benefit of, the person.
scheme means:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct.
secondary taxable amount, in relation to a person or persons, means an amount that is a secondary taxable amount under section 6 in relation to an eligible beneficiaries class in which the person is, or the persons are, included.
taxable amount means a primary taxable amount, a secondary taxable amount, a company taxable amount or an elected taxable amount.
trust recoupment tax means tax assessed under this Act and imposed by the Trust Recoupment Tax Act 1985.
(2) The reference in the definition of scheme in subsection (1) to a scheme, plan, proposal, action, course of action or course of conduct shall be read as including a reference to a unilateral scheme, plan, proposal, action, course of action or course of conduct, as the case may be.
(3) In this Act, a reference to the time of entry into a scheme is a reference to:
(a) if the scheme is a unilateral scheme—the time when the scheme is commenced to be carried out; and
(b) in any other case—the time when the scheme is entered into.
(4) For the purposes of this Act, a scheme shall be taken to be a tax avoidance scheme if and only if, having regard to:
(a) the manner in which the scheme was entered into or carried out;
(b) the form and substance of the scheme;
(c) the time at which the scheme was entered into and the length of the period during which the scheme was carried out;
(d) the result in relation to the operation of the Assessment Act that, but for section 100A and Part IVA of that Act, would be achieved by the scheme;
(e) any change in the financial position of any person that has resulted, will result or may reasonably be expected to result from the scheme; and
(f) any other consequence for any person of the scheme having been entered into or carried out;
it would be concluded that the person, or any of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of securing that a person or persons (whether or not a particular person or particular persons) who, if the scheme had not been entered into or carried out, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than the person or persons would have been liable to pay if the scheme had not been entered into or carried out.
(5) In subsection (4):
(a) a reference to the carrying out of a scheme or a part of a scheme by a person shall be read as including a reference to the carrying out of a scheme or a part of a scheme by a person together with another person or other persons; and
(b) a reference to a scheme or a part of a scheme being entered into or carried out by a person for a particular purpose shall be read as including a reference to a scheme or a part of a scheme being entered into or carried out by the person for 2 or more purposes of which that particular purpose is the dominant purpose.
(6) For the purposes of this Act, trust recoupment tax that has been assessed shall be deemed to be payable notwithstanding that it has not become due and payable.
4 Application of tax legislation
4 Application of tax legislation
(1) Unless the contrary intention appears in this Act, sections 6 and 7A, Part II, section 21, Part IV, section 204, and Parts VII and VIII of the Assessment Act, Part IIA of, and Part 4‑15 in Schedule 1 to, the Taxation Administration Act 1953, and regulations made under those Acts, apply for the purposes of the assessment and collection of trust recoupment tax and penalty tax, in like manner, mutatis mutandis, as those provisions apply for the purposes of the assessment and collection of income tax under the Assessment Act.
(2) A reference in this Act to a provision of the Assessment Act or of the Taxation Administration Act 1953 shall, unless the contrary intention appears, be read as a reference to that provision in its application, in accordance with subsection (1), for the purposes of this Act.
(3) For the purposes of section 14 of the Assessment Act, this Act shall be deemed to be part of the Assessment Act.
(4) Nothing in section 355‑25 or 355‑155 in Schedule 1 of the Taxation Administration Act 1953 prevents:
(a) the disclosure, to a person who is, or in the opinion of the Commissioner is likely to become, liable to pay trust recoupment tax, or to pay income tax by virtue of the operation of section 7 of this Act, of information relating to the affairs of another person where that information was, or in the opinion of the Commissioner is likely to be, taken into account in the assessment of the liability of the first‑mentioned person to pay trust recoupment tax, or to pay income tax by virtue of the operation of section 7 of this Act, as the case may be; or
(b) the disclosure, to a person who is, or in the opinion of the Commissioner is likely to become, jointly and severally liable with other persons to pay trust recoupment tax, of the identity of, and particulars of the liability of, any of the other persons liable to pay that trust recoupment tax.
(5) Nothing in section 170 of the Assessment Act prevents the amendment, at any time, of an assessment for the purpose of giving effect to subsection 6(2) or section 7 of this Act.
(7) Unless the contrary intention appears, a reference in section 215 of the Assessment Act to tax shall be deemed to include a reference to:
(a) trust recoupment tax;
(b) late payment tax;
(c) applied penalty tax; and
(d) penalty tax.
(9) For the purposes of the application of any of the provisions of the Assessment Act or of the Taxation Administration Act 1953 in accordance with subsection (1), where 2 or more persons are jointly and severally liable to pay trust recoupment tax, or penalty tax, on a secondary taxable amount, service of a notice of assessment or any other notice in respect of that liability on any of those persons shall be deemed to be service of the notice on each of those persons.
(10) The validity of an assessment of the trust recoupment tax or penalty tax payable on a secondary taxable amount by the persons included in an eligible beneficiaries class in relation to that secondary taxable amount is not affected by reason that the notice of assessment identifies only one or some of the persons included in that eligible beneficiaries class.
5 Primary taxable amounts
5 Primary taxable amounts
(1) Subject to subsections (2) and (3), where:
(a) at any time, whether before or after the commencement of this Act, a beneficiary of a trust estate had a vested and indefeasible interest in any of the income of the trust estate of a year of income (in this subsection referred to as the relevant year of income);
(b) the beneficiary was not presently entitled to that income but would, apart from this section and subsection 100A(1) of the Assessment Act, have been deemed for the purposes of that Act to be presently entitled to that income;
(c) the vested and indefeasible interest of the beneficiary in the whole or a part of that income (which whole or part is in this subsection referred to as the relevant trust income) arose out of a tax avoidance scheme, or by reason of any act, transaction or circumstance that occurred as part of, in connection with or as a result of a tax avoidance scheme, entered into on or after 12 May 1982;
(d) by reason of, as a result of or as part of the tax avoidance scheme or by reason of any act, transaction or circumstance that has occurred, will occur, or may reasonably be expected to occur, being an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance scheme, the present value of the benefit, or the sum of the present values of each of the benefits, that has or have been, will be, or may reasonably be expected to be, derived by the beneficiary as a consequence of the vested and indefeasible interest of the beneficiary in the relevant trust income is less than 50% of the amount of the relevant trust income; and
(e) by reason that the beneficiary would, apart from this section and subsection 100A(1) of the Assessment Act, have been deemed for the purposes of that Act to be presently entitled to the relevant trust income, the trustee of the trust estate would not have been liable to be assessed and to pay tax under section 99 or 99A of that Act in respect of the net income or a part of the net income (which net income or part is in this subsection referred to as the relevant amount) of the trust estate of the relevant year of income;
the following provisions have effect:
(f) the beneficiary shall, for the purposes of the Assessment Act other than sections 99 and 99A, be deemed not to be, and never to have been, presently entitled to the relevant trust income;
(g) a primary taxable amount equal to the relevant amount shall be taken to exist in relation to the trustee of the trust estate in relation to the relevant year of income.
(2) Subject to subsection (3), where:
(a) by reason of the application of subsection (1) or of this subsection, a primary taxable amount exists in relation to the trustee of a trust estate (in this subsection referred to as the sub‑trust) in relation to a year of income (in this subsection referred to as the relevant year of income) in relation to a tax avoidance scheme (in this subsection referred to as the relevant scheme);
(b) apart from this section and section 100A of the Assessment Act, the trustee of the sub‑trust:
(i) was presently entitled to a share of the income of another trust estate (in this subsection referred to as the head trust) of the relevant year of income;
(ii) would, by reason that income of another trust estate (in this subsection also referred to as the head trust) of the relevant year of income was paid to, or applied for the benefit of, the trustee of the sub‑trust, have been deemed, for the purposes of the Assessment Act, to be presently entitled to income of the head trust; or
(iii) would, by reason that the trustee of the sub‑trust had a vested and indefeasible interest in any of the income of another trust estate (in this subsection also referred to as the head trust) of the relevant year of income, have been deemed, for the purposes of the Assessment Act, to be presently entitled to that income of the head trust;
(c) in a case to which subparagraph (b)(i) applies—the present entitlement of the trustee of the sub‑trust to the share or to a part of the share (which share or part is in this subsection referred to as the relevant head trust income) of the income of the head trust referred to in that subparagraph arose out of the relevant scheme or arose by reason of any act, transaction or circumstance that oc
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