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s99B ITAA 1936 is about foreign trusts paying accumulated income to Australian resident beneficiaries. Take away one of these elements, and you don’t have a s99B issue.
s99B ITAA 1936
A trust is a resident trust if at least one of a trust’s trustees is a resident or at least one of its corporate trustees has its CMC / CMAC in Australia. If this is news to you, please listen to episodes 399 and 400 with Andrew Henshaw about foreign trusts, since it will help to follow this episode.
Now of course, you are aware of the fact that our residency rules in Australia are not straightforward. But for this episode, let’s assume they are.
And so let’s focus on what happens to the trust and its beneficiaries when the trust is either a foreign or resident trust and distributes current and accumulated income as well as corpus.
In this episode Bradley Murphy and Darren Catherall of Murphy Tax in Sydney, will walk you through the taxation of trusts around s99B ITAA 1936.
Here is what we learned. Please listen in as Bradley and Darren explain all this much better than we ever could. And they go into a lot more detail. These show notes are just a very short summary, touching the tip of the iceberg.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
s99B ITAA 1936
s99B is only an issue if a foreign trust distributes accumulated income to a resident beneficiary. If a foreign trust distributes current income to resident beneficiaries, it gets caught by s97 anyway.
It is only an issue when you have a foreign trust. A resident trust distributing accumulated income doesn’t face s99B. The accumulated income would already have been taxed in the hands of the trustee per s98 ITAA 1936.
And you only get a s99B issue when the legal owners are overseas but the beneficiaries are in Australia. So when your Australian clients are the legal owners of their parent’s family homes overseas with the parents holdings a life interest in that home – as you often see to manage overseas inheritance tax – they don’t face a s99B issue, since your Australian clients are the legal owners and the beneficiaries are overseas.
So this episode 407 was about applying s99B. In episode 408, Bradley Murphy and Darren Catherall will talk with you ab about the s99B carve-outs. They will go back to the central question about corpus.
Please listen to the actual episode since we really only skimmed over a lot of the issues.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 13 November 2023
Tax Talks spoke to Bradley Murphy and Darren Catherall - Tax Partner at Murphy Tax Lawyers and Advisors - for more details.
