Receiving payments or assets from foreign trusts
The ATO is focusing its attention on Australian residents who receive payments or assets from a foreign trust
Under section 99B of the ITAA 1936, where foreign trust property is paid to or applied for the benefit of an Australian resident, the amount should be included in their assessable income, subject to certain exceptions. Trust property can include:
• Loans by the trustee directly or indirectly
• Amounts paid by the trustee to a third party on behalf of the Australian resident
• Amounts described as gifts from family members, but sourced from the trust
• Distributions paid to the Australian resident or trust assets transferred from the trustee.
In some cases, the amount that would be taxed under section 99B can be reduced to the extent that it has already been assessed in Australia to either the beneficiary or the trustee under another provision, or if the amount represents corpus (except where the corpus represents income or gains made by the trust that haven’t been taxed in Australia but would have been had they been derived by an Australian resident).
The ATO expects taxpayers who receive money or property from overseas to make relevant queries as to the source of the funds or assets, to determine whether the amounts should be included in their assessable income.
Examples of when section 99B needs to be considered include:
• An Australian beneficiary receives money from a family member who received the funds initially from a foreign trust
• An Australian beneficiary receives a capital distribution from a foreign trust out of the trust's accumulated prior year income
• A family member provides an amount of money from their foreign family trust (or through another intermediary) and the recipient, who considers the amount a gift, is also a beneficiary of the trust
• An Australian beneficiary receives a loan from a foreign trust that is sourced from prior year income derived by the trust.
