Words and Phrases - "entitlement"

a
88
b
44
c
78
d
52
e
38
f
31
g
19
h
14
i
74
j
2
k
2
l
32
m
56
n
25
o
38
p
81
q
3
r
76
s
90
t
47
u
16
v
9
w
23
y
2

Lewski v Commissioner of Taxation, [2017] FCAFC 145

Summary Under
Tax Topics - Income Tax Act - Section 104 - Subsection 104(24)
an alternate resolution that the taxpayer was not entitled to an income distribution if Revenue denied a trust deduction made her entitlement contingent and non-includible

On June 30, 2006, the trustee of a trust resolved that 100% of all of its income for the year then ending would be paid, applied and set aside to or for the benefit of the taxpayer, but with it being further resolved in a “variation of income” resolution that (as interpreted by the Court at para. 118) should the Commissioner of Taxation disallow any amount as a deduction to the trust, that amount was to be deemed to have been distributed on the same (On June 30, 2006) date to an alternate beneficiary. Subsequently, the Commissioner denied a loss-carryforward that had been claimed by the trust, and the taxpayer claimed that the variation of income resolution precluded the inclusion of (what was now, a much bigger amount of) income in her hands.

S. 97(1) of the Income Tax Assessment Act 1936 (Cth) relevantly provided that “where a beneficiary of a trust estate who is not under any legal disability is presently entitled to a share of the income of the trust estate” the assessable income of the beneficiary includes “so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident”. After referencing the statement in Harmer v Commissioner of Taxation (Cth) (1991) 173 CLR 264 at 271, that:

(a) the beneficiary has an interest in the income which is both vested in interest and vested in possession; and (b) the beneficiary has a present legal right to demand and receive payment of the income, whether or not the precise entitlement can be ascertained before the end of the relevant year of income and whether or not the trustee has the funds available for immediate payment.

the Court stated (at para. 121):

[I]f the two resolutions are read together, the distribution to the applicant was contingent: it depended on the occurrence of an event that may or may not take place (namely, the Commissioner disallowing a deduction…). It follows that, assuming that each ‘variation of income’ resolution was authorised by the relevant trust deed, the applicant was not “presently entitled” to a share of the net income of the trust estate … for [that] year… .

Words and Phrases
entitlement