Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1936 - SECT 94

  (1)   Subject to this section, where:

  (a)   a share in the net income of a partnership of a year of income is included in the assessable income of a partner in the partnership, not being:

  (i)   a company;

  (ii)   a person in the capacity of a trustee; or

  (iii)   a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership; and

  (b)   the partnership is so constituted or controlled, or its operations are so conducted, that the partner has not the real and effective control and disposal of that share or of a part of that share;

this section applies to that share or that part of that share, as the case may be.

  (2)   Subject to the succeeding provisions of this section, where:

  (a)   a partnership is so constituted or controlled, or its operations are so conducted, that a partner in the partnership, being a trustee of a trust estate, has not the real and effective control and disposal of his or her share in the net income of the partnership of a year of income or of a part of that share (which share or part of a share, as the case may be, is in this subsection referred to as uncontrolled partnership income ); and

  (b)   in calculating in accordance with section   95 the net income of that trust estate or of any other trust estate, there is included in the assessable income of the trust estate any uncontrolled partnership income;

then:

  (c)   if:

  (i)   a beneficiary, not being a company or a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership, is presently entitled to the whole of the income of the trust estate otherwise than in the capacity of a trustee; or

  (ii)   there is no part of the net income of the trust estate that is included in the assessable income of a beneficiary in pursuance of section   97 or in respect of which the trustee is assessed and liable to pay tax in pursuance of section   98;

    this section applies to the portion of the net income of the trust estate that was derived from uncontrolled partnership income;

  (d)   if a beneficiary, not being a company or a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership, is presently entitled to a share of the income of the trust estate otherwise than in the capacity of a trustee, this section applies to so much of that share of the net income of the trust estate as bears to that share the same proportion as the portion of the net income of the trust estate that was derived from uncontrolled partnership income bears to the net income of the trust estate; and

  (e)   if there is a part of the net income of the trust estate that is not included in the assessable income of a beneficiary in pursuance of section   97 and in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section   98, this section applies to so much of that part of the net income of the trust estate as bears to that part the same proportion as the portion of the net income of the trust estate that was derived from uncontrolled partnership income bears to the net income of the trust estate.

  (5)   For the purposes of this section:

  (a)   where:

  (i)   the assessable income of a trust estate includes the net income or a share of the net income of another trust estate; and

  (ii)   the assessable income of the other trust estate by reference to which that net income is calculated included income of a particular class (including an amount that is to be deemed by an application or applications of this paragraph to be income of a particular class);

    the assessable income of the first - mentioned trust estate shall be deemed to include income of that class of an amount equal to so much of the net income or share of the net income of the other trust estate that is included in the assessable income of the first - mentioned trust estate as bears to that net income or share of that net income the same proportion as the portion of the net income of the other trust estate that was derived from income of that class bears to the net income of the other trust estate; and

  (b)   the portion of the net income of a trust estate that is derived from income of a particular class that is included in the assessable income of the trust estate is the amount remaining after deducting from the income of that class that is included in the assessable income of the trust estate:

  (i)   any prescribed deductions that relate exclusively to that income of that class;

  (ii)   so much of any other prescribed deductions (other than apportionable deductions) as, in the opinion of the Commissioner, may appropriately be related to that income of that class; and

  (iii)   the amount that bears to the prescribed deductions (being apportionable deductions) the same proportion as the amount that, but for this subparagraph, would be the portion of the net income of the trust estate that is derived from that income of that class bears to the sum of the net income of the trust estate and those last - mentioned prescribed deductions.

  (6)   Where the assessable income of a trust estate includes, or, by virtue of paragraph   (5)(a), is to be deemed to include, income of a particular class but the Commissioner is of the opinion that it would be unreasonable to treat each part or share of the net income of the trust estate that is included in the assessable income of a beneficiary, or on or in respect of which the trustee is assessed and liable to pay tax, as including a proportionate part of the portion of the net income of the trust estate that is derived from income of that class, the amount:

  (a)   that is the amount of a part or share of the net income of the trust estate to which this section applies by virtue of paragraph   (2)(d) or (e); or

  (b)   that is, by virtue of paragraph   (5)(a), the amount of the income of that class that is to be deemed to be included in the assessable income of another trust estate;

is, in lieu of the amount that, but for this subsection, would be the amount of that part or share of that net income or the amount of that income of that class, as the case may be, such amount as the Commissioner considers reasonable in the circumstances.

  (8)   Where the Commissioner is of the opinion that, by reason of special circumstances, it would be unreasonable that this section should apply to any income, this section does not apply to that income.

  (8A)   In forming an opinion for the purposes of subsection   (8) as to whether it is unreasonable that this section should apply in relation to any of the net income of a trust estate, the Commissioner shall take into consideration the extent (if any) to which that net income represents income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia.

  (9)   Where the assessable income of a taxpayer, other than a taxpayer in the capacity of a trustee, includes income to which this section applies, the taxpayer shall be assessed and is liable to pay further tax, in accordance with subsection   (10A) or (10B), upon the portion (in this section referred to as the eligible portion ) of his or her taxable income that is derived from income to which this section applies.

  (10)   For the purposes of subsection   (9), the portion of the taxable income of a taxpayer that is derived from income to which this section applies is the amount remaining after deducting from the income to which this section applies that is included in his or her assessable income:

  (a)   any deductions allowed or allowable in his or her assessment that relate exclusively to the income to which this section applies that is included in his or her assessable income;

  (b)   so much of any other deductions allowed or allowable in his or her assessment (other than apportionable deductions) as, in the opinion of the Commissioner, may appropriately be related to the income to which this section applies that is included in his or her assessable income; and

  (c)   the amount that bears to the apportionable deductions allowed or allowable in his or her assessment the same proportion as the amount that, but for this paragraph, would be the portion of his or her taxable income that is derived from income to which this section applies bears to the sum of his or her taxable income and those apportionable deductions.

  (10A)   Where Division   392 (Long - term averaging of primary producers' tax liability) of the Income Tax Assessment Act 1997 does not apply in relation to the income of a taxpayer of the year of income, the taxpayer is liable to pay further tax upon the eligible portion of his or her taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection   (9) in respect of the relevant part of the taxable income.

  (10B)   Where Division   392 (Long - term averaging of primary producers' tax liability) of the Income Tax Assessment Act 1997 applies in relation to the income of a taxpayer of the year of income, the taxpayer is liable to pay further tax upon the relevant part of the eligible portion of his or her taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection   (9) in respect of the relevant part of the taxable income and is, in addition, liable to pay further tax upon the prescribed part of the eligible portion of his or her taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection   (9) in respect of the prescribed part of the taxable income.

  (10C)   For the purposes of subsections   (10A) and (10B):

  (a)   the prescribed part of the eligible portion of the taxable income of a taxpayer of a year of income is:

  (i)   in a case to which subparagraph   (ii) does not apply--the sum of:

  (A)   the amount ascertained by deducting from so much of the assessable primary production income of the taxpayer as is also income to which this section applies so much of the deductions allowable in his or her assessment as constitutes primary production deductions and is also deductible in accordance with subsection   (10) from income to which this section applies; and

  (B)   the amount (if any) ascertained in accordance with the formula , where:

    A   is the amount shown in the following table:

    B   is the number of whole dollars in the amount ascertained by deducting from the eligible portion the amount calculated in accordance with sub - subparagraph   (A); and

    C   is the number of whole dollars in the amount ascertained by deducting from the taxable income of the taxpayer of the year of income the taxable primary production income of the taxpayer of the year of income; and

  (ii)   in a case where the taxpayer's primary production deductions for the year of income exceed the taxpayer's assessable primary production income for that year--the amount ascertained in accordance with the formula , where:

    A   is the amount shown in the following table:

    B   is the number of whole dollars in the eligible portion.

    C   is the number of whole dollars in the taxable income of the taxpayer of the year of income; and

    D   is the number of whole dollars in the difference between the taxpayer's primary production deductions for the year of income and the taxpayer's assessable primary production income for that year; and

  (b)   the relevant part of the eligible portion of the taxable income of the taxpayer is the amount ascertained by deducting from the amount of that eligible portion so much of that eligible portion as is the prescribed part of that eligible portion.

  (11)   Where:

  (a)   section   98 applies in relation to the net income of a trust estate or a share of that net income; and

  (b)   this section applies to a portion (in this subsection referred to as the relevant portion ) of that net income or of that share of that net income, as the case may be;

the trustee of the trust estate shall be assessed and is liable to pay further tax, in accordance with subsection   (12A) or (12B), upon the relevant portion of that net income or of that share of that net income, as the case may be.

  (12)   Where:

  (a)   section   99 applies in relation to the net income of a trust estate or a part of that net income; and

  (b)   this section applies to a portion (in this section referred to as the eligible trust portion ) of that net income or of that part of that net income, as the case may be;

the trustee of the trust estate shall be assessed and is liable to pay further tax, in accordance with subsection   (12A) or (12B), upon the eligible trust portion.

  (12A)   Where Division   16 does not apply in respect of the net income of a trust estate of which the eligible trust portion is a portion, the trustee is liable to pay further tax upon the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection   (11) or (12) in respect of the relevant part of the net income of a trust estate.

  (12B)   Where Division   16 applies in respect of the net income of a trust estate of which the eligible trust portion is a portion, the trustee is liable to pay further tax upon the relevant part of the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection   (11) or (12) in respect of the relevant part of the net income of a trust estate and is, in addition, liable to pay further tax upon the prescribed part of the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection   (11) or (12) in respect of the prescribed part of the net income of a trust estate.

  (12C)   For the purposes of subsections   (12A) and (12B):

  (a)   the prescribed part of the eligible trust portion in relation to a trust estate in relation to a year of income is:

  (i)   in a case to which subparagraph   (ii) does not apply--the sum of:

  (A)   the amount ascertained by deducting from so much of the assessable primary production income of the trust estate of the year of income as is also income that was taken into account in determining the amount of the eligible trust portion so much of the deductions allowable in the assessment of the trustee of the trust estate as constitutes relevant primary production deductions and was also deductible in accordance with subsection   (5) in determining the amount of the eligible trust portion; and

  (B)   the amount (if any) ascertained in accordance with the formula , where:

    A   is the amount of the notional net income from primary production of the trust estate of the year of income.

    B   is the number of whole dollars in the amount ascertained by deducting from the eligible trust portion the amount calculated in accordance with sub - subparagraph   (A); and

    C   is the number of whole dollars in the amount ascertained by deducting from the net income of the trust estate of which the eligible trust portion is a portion the actual net income from primary production of the trust estate of the year of income; and

  (ii)   in a case where the aggregate of the relevant primary production deductions allowable in calculating the net income of the trust estate of the year of income exceeds the assessable primary production income of the trust estate of the year of income--the amount ascertained in accordance with the formula , where:

    A   is the amount of the notional net income from primary production of the trust estate of the year of income.

    B   is the number of whole dollars in the eligible trust portion.

    C   is the number of whole dollars in the net income of the trust estate of which the eligible trust portion is a portion; and

    D   is the number of whole dollars in the amount by which the net income of the trust estate of which the eligible trust portion is a portion would have been increased if the aggregate of the relevant primary production deductions allowable in calculating the net income of the trust estate of the year of income had been equal to the assessable primary production income of the trust estate of the year of income; and

  (b)   the relevant part of the eligible trust portion in relation to a trust estate is the amount ascertained by deducting from that eligible trust portion so much of that eligible trust portion as is the prescribed part of that eligible trust portion.

  (13)   In this section:

"prescribed deductions" , in relation to a trust estate, means the deductions that are allowable in calculating in accordance with section   95 the net income of the trust estate.

"share in the net income of a partnership" , in relation to a partner, means:

  (a)   so much of the individual interest of the partner in the net income of the partnership and of any income derived by the partner from the partnership otherwise than as a partner as is attributable to a period when the partner was a resident; and

  (b)   so much of the individual interest of the partner in the net income of the partnership and of any income derived by the partner from the partnership otherwise than as a partner as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.

  (14)   In this section, actual net income from primary production , assessable primary production income , notional net income from primary production and relevant primary production deductions have the same respective meanings as in section   156.

  (15)   In this section, the following terms have the same meanings that they have in Division   392 (Long - term averaging of primary producers' tax liability) of the Income Tax Assessment Act 1997 :

  (a)   assessable primary production income;

  (b)   basic taxable income;

  (c)   non - primary production shade - out amount;

  (d)   primary production deductions;

  (e)   taxable non - primary production income;

  (f)   taxable primary production income.