To be issued in mid-2024, it will explain when the ATO will consider enforcement action based on section 99B of the Income Tax Assessment Act 1936 (the 1936 Act), where distributions have been made from non-resident trusts to beneficiaries. It will also provide taxpayers with practical guidance about record keeping.
S.99B applies when money or another asset of a foreign trust is paid to or applied for the benefit of a beneficiary of the trust. The amount or value of the asset is included in the recipient's assessable income, although there are some exceptions. These include when the distribution has already been assessed to the beneficiary or trustee under another provision of the income tax law or when it represents an amount of initial corpus of the trust or additional contributions of corpus.
The draft determination will clarify the ATO's view on the hypothetical taxpayer test, which is an element of s.99B. The ATO says it is engaging with key professional bodies on issues that may arise from the compliance approach being developed. It says it is often alerted to potential s.99B cases as a result of the Australian Transaction Reports and Analysis Centre monitoring of payments to Australian residents from overseas. This data is matched with information reported in tax returns.
The project is part of the Australian authorities' initiative to tighten up taxation of foreign trust beneficiaries. In May 2024, the 2024/25 federal budget proposed to amend the foreign resident capital gains tax (CGT) regime to ensure foreign residents pay CGT on direct and indirect sales of assets with a 'close economic connection' to Australian land.
Several other consultations on income tax issues are also under development at the ATO, notably a new guideline on when the ATO will consider applying the general anti-avoidance provisions in Part IVA of the 1936 Act to an alienation arrangement, where personal services income of an individual is derived through a personal services entity that is conducting a personal services business.
Source：【2024/7/2 ATO】