4.3.9.60 Income from Private Companies & Trusts

Introduction

These rules apply to the assessment of income from private companies and trusts for:

  • all income support recipients prior to 1 January 2002,
  • income support recipients who are non-attributable stakeholders of private companies and trusts on or after 1 January 2002, or
  • income support recipients who receive income from private companies and trusts that do not meet the definition of 'designated' or 'controlled' private companies and trusts.

General information

For many income support recipients assessment of income from private companies and trusts changed from 1 January 2002. For income support recipients who are affected by the new rules, please also see section 4.12.7 for the treatment of income from private companies and trusts.

Private companies & trusts

Dividends and distributions received from private companies and trusts ARE included in the income support recipient's income. The gross amount of the dividend payment, including any imputation credit, is the amount to be assessed as income.

The assessed income includes the actual amount of any individual payments, AND any franking credits attached to them.

Explanation: Franking credits are also known as imputation credits.

Prior to 1 July 2000, a taxpayer obtained a tax rebate equal to the amount of imputation credits received. The rebate reduced income tax payable, but once tax payable was reduced to zero, no benefit was obtained from further excess credits and was lost.

From the 2000-01 financial year, a person without a tax liability can lodge an 'Application for Refund of Imputation Credits for Individuals' with the ATO and receive a payment from the ATO equal to the amount of imputation credits. A person with a tax liability will continue to lodge an income tax return to obtain a rebate to reduce income tax payable.

From 1 July 2001, a person without a tax liability may receive the gross amount of the dividend from the source of the dividend, i.e. eligible taxpayers will be able to receive early refunds of excess imputation credits.

Policy reference: SS Guide 1.1.F.175 Franked dividends, 1.1.I.25 Imputation credits, 4.7.2.10 Assessable Income from Private Companies pre-01/01/2002, 4.7.3.20 Assessable Income from Discretionary Trusts pre-01/01/2002, 4.12.7.10 Income Attribution, 4.12.7.40 Distributions of the Income of a Private Trust or Private Company to an Attributable Stakeholder, 4.12.7.50 Distributions of the Income of a Private Trust or Private Company to a Non-attributable Stakeholder

Last reviewed: 11 August 2014