The purpose of this distinction is to establish that, if the only income of the Trust Estate is exempt income, the operative provisions will still apply. In particular, section 97(1)(b) would extend the exemption to the Beneficiary, even though there was no other assessable income (i.e., even though there was no other ordinary or statutory income). Currently, if the only income of the Trust Estate was exempt income, there is an argument that: section 97 does not apply (because the terms of the prefatory wording have not been satisfied); and section 97(1)(b) does not pass the exemption on to the Beneficiary. 4.3 Operative Provisions Once this prefatory wording is satisfied, paragraphs (a), (b) and (c) will apply to the Beneficiary. This makes it clear that the amount of the share or interest is irrelevant to the operation of the subsequent paragraphs. This simple amendment removes the distinction between: and “distributable income”; or “assessable income” “taxable income”. This distinction is and always has been a red herring. The Tax Legislation should be concerned with and in the same “assessable income” “taxable income” manner as it is with other entities. 5. Ordinary and Statutory Income I do not accept that there ever was a legitimate argument that section 97 applied only to ordinary income, and not to statutory income. Section 102-5 includes the net capital gain in the assessable income of the Trust Estate. Trust’s Section 115-215(2)(b)(i) of the 1997 Act envisages that the assessable income might Beneficiary’s include an amount trust attributable to a capital gain of the Trust Estate as a result of the (“a amount”) operation of section 97(1)(a). Thus, it is submitted that the correct interpretation of section 97 has always been that it was the vehicle for both ordinary and statutory income of the Trust Estate to get into the assessable income of the Beneficiary. However, to the extent that there is perceived to be any ambiguity or uncertainty, it should also be made clear that the section applies equally to ordinary and statutory income.
The purpose of this distinction is to establish that, if the only income of the Trust Estate is exempt income, the operative provisions will still apply. In particular, section 97(1)(b) would extend the exemption to the Beneficiary, even though there was no other assessable income (i.e., even though there was no other ordinary or statutory income). Currently, if the only income of the Trust Estate was exempt income, there is an argument that: section 97 does not apply (because the terms of the prefatory wording have not been satisfied); and section 97(1)(b) does not pass the exemption on to the Beneficiary. 4.3 Operative Provisions Once this prefatory wording is satisfied, paragraphs (a), (b) and (c) will apply to the Beneficiary. This makes it clear that the amount of the share or interest is irrelevant to the operation of the subsequent paragraphs. This simple amendment removes the distinction between: “distributable income”; and “assessable income” or “taxable income”. This distinction is and always has been a red herring. The Tax Legislation should be concerned with “assessable income” and “taxable income” in the same manner as it is with other entities. 5. Ordinary and Statutory Income I do not accept that there ever was a legitimate argument that section 97 applied only to ordinary income, and not to statutory income. Section 102-5 includes the Trust’s net capital gain in the assessable income of the Trust Estate. Section 115-215(2)(b)(i) of the 1997 Act envisages that the Beneficiary’s assessable income might include an amount (“a trust amount”) attributable to a capital gain of the Trust Estate as a result of the operation of section 97(1)(a). Thus, it is submitted that the correct interpretation of section 97 has always been that it was the vehicle for both ordinary and statutory income of the Trust Estate to get into the assessable income of the Beneficiary. However, to the extent that there is perceived to be any ambiguity or uncertainty, it should also be made clear that the section applies equally to ordinary and statutory income.
Ian_Gray_Solicitors_submission.docx