7Requests 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: