The Full Court of the Federal Court has dismissed one of two appeals from the AAT and allowed the other. The court held unanimously that the term "that share" in the phrase "that share of the net income of the trust estate" in s 97(1)(a)(i) ITAA 1936 refers to a beneficiary's proportionate or fractional entitlement to the income of the trust estate. Thus, a beneficiary presently entitled to income of the trust estate in a given year will have included in that beneficiary's assessable income the proportion of the net income of the trust estate equal to the proportion that the income of the trust estate to which the beneficiary is presently entitled bears to the income that has been distributed during the year or remains available for distribution as at the end of the year, in accordance with ordinary principles of trusts and trust accounting. It is erroneous to treat "that share" as referring to a fixed amount.
The court also held, by majority, that the expression "the income of the trust estate" is to be interpreted as meaning the income of the trust as understood in trust law. This followed from the decision in Cajkusic v FCT  FCAFC 164; (2006) 155 FCR 430. The terms of the trust deed may therefore have the effect of altering the income of the trust for s 97 purposes.
Bamford v FCT  FCAFC 66 (Federal Court, Full Court, Emmett, Stone & Perram JJ, 3 June 2009)
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