Is a beneficiary's share of net income worked out by the proportionate approach? - TD 2012/D5
14 Jun 2012
On 13 June 2012, the ATO released for public comment by 13 July 2012 draft Taxation Determination TD 2012/D5 entitled "Income tax: for the purposes of s 97(1)(a) of ITAA 1936 is a beneficiary's share of net income worked out by reference to the proportion of the income of the trust estate to which the beneficiary is presently entitled?"
The answer given is:
"Yes. To determine the share of net income of a trust estate to be included in a beneficiary's assessable income under s 97(1)(a) of the ITAA 1936, the beneficiary must:
(i) calculate how much of the income of the trust estate they are (or are taken to be) presently entitled to, as percentage share of that income; and
(ii) apply that percentage to the net income of the trust.
This approach is often referred to as the 'proportionate approach' to the assessment of trust net income."
Note that "income of the trust estate" for these purposes means the income of the trust estate as explained in draft Taxation Ruling TR 2012/D1.