Disposal of income by company or trust
1208R Disposal of income by company or trust
If:
an individual is an attributable stakeholder of a company or trust; and
the company or trust disposes of ordinary income of the company or trust; and
if that income had been income of the individual instead of the company or trust, the income would have been ordinary income of the individual; and
if the ordinary income is income from an asset—the course of conduct that constituted the disposition of the income did not also constitute a disposition of the asset;
Division 3 of Part 3.10 applies, and is taken to have applied, as if:
the individual had disposed of ordinary income of the individual; and
the amount of the disposition referred to in paragraph (e) were equal to the individual’s income attribution percentage of the amount of the disposition referred to in paragraph (b).
Subsection (1) has effect subject to subsection (3).
Secretarial determinations
The Secretary may, by writing:
determine that the disposal of specified ordinary income is exempt from subsection (1); or
determine that subsection (1) has effect, in relation to the disposal of specified ordinary income, as if the reference in paragraph (1)(f) to the individual’s income attribution percentage were a reference to such lower percentage as is specified in the determination.
A determination under subsection (3) has effect accordingly.
In making a determination under subsection (3), the Secretary must comply with any relevant decision‑making principles.
General disposal
For the purposes of subsection (1), a company or trust disposes of ordinary income of the company or trust if:
on or after 1 January 2002, the company or trust, or an attributable stakeholder of the company or trust, engages in a course of conduct that directly or indirectly:
destroys the source of the income; or
disposes of the income or the source of the income; or
diminishes the income; and
one of the following subparagraphs is satisfied:
the company or trust receives no consideration in money or money’s worth for the destruction, disposal or diminution;
the company or trust receives inadequate consideration in money or money’s worth for the destruction, disposal or diminution;
the Secretary is satisfied that the purpose, or the dominant purpose, of the company, trust or stakeholder in engaging in that course of conduct was to obtain a social security advantage for an attributable stakeholder of the company or trust (who may be the first‑mentioned stakeholder) or for a relative of an attributable stakeholder of the company or trust; and
in the case of a company—the disposal is not by way of making a distribution of capital or profits of the company to a shareholder of the company; and
in the case of a trust—the disposal is not by way of:
making a distribution (whether in money or in other property) to a beneficiary of the trust; or
crediting an amount to a beneficiary of the trust.
If a company or trust disposes of ordinary income as mentioned in subsection (6), the amount of the disposition is:
if the company or trust receives no consideration for the destruction, disposal or diminution—the annual rate of the diminution of the income because of the destruction, disposal or diminution; or
if the company or trust receives consideration for the destruction, disposal or diminution—the annual rate of the diminution of the income because of the destruction, disposal or diminution less the part (if any) of the consideration that the Secretary considers to be fair and reasonable in all the circumstances of the case.
Obtaining a social security advantage
For the purposes of this section, an entity has a purpose of obtaining a social security advantage for an individual (who may be the entity) if the entity has a purpose of:
enabling the individual to obtain any of the following:
a social security pension;
a social security benefit;
a service pension;
income support supplement;
a veteran payment; or
enabling the individual to obtain any of the following at a higher rate than would otherwise have been payable:
a social security pension;
a social security benefit;
a service pension;
income support supplement;
a veteran payment; or
ensuring that the individual would be qualified for fringe benefits for the purposes of this Act or the Veterans’ Entitlements Act.
Ordinary income
In this section:
ordinary income, in relation to a company or trust, has the same meaning as in Division 7.
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