For advisers · Tool 02 · technical briefing
Where the tax sits, how it is calculated, when interest starts, what the Tax Office says, and the questions the law still leaves open. General information, not advice.
Where it sits
Schedule 2F, Income Tax Assessment Act 1936. Introduced to stop trusts trading in losses. It applies back to 1995.
C1
The rate
The top marginal rate plus Medicare levy on the amount distributed outside the family group: 47% today.
C1
Time limit
None. The usual amendment periods do not apply.
C1 · C2
Discretion
The Tax Office says the Commissioner has no discretion to waive it.
C2
Interest
Tax is due 21 days after the distribution. General interest charge runs from day 81, compounding daily.
C5 · C6
Current interest discount
Up to 80% interest remission until 30 June 2027, only for self-review before an audit starts, decided case by case. The penalty tax itself is not reduced.
C12
| Distribution year | FTDT rate |
|---|---|
| 1995 to 2006 | 48.5% (48.4% in 1995, 48.7% in 1997) |
| 2007 to 2014 | 46.5% |
| 2015 to 2017 | 49% (includes the Temporary Budget Repair Levy) |
| 2018 to 2026 | 47% |
Top marginal rate plus Medicare levy for each year. Client to confirm the 2015 to 2017 rate.
The Tax Office’s published view is that an interposed entity election stays effective even after the company has no connection with the original family, and even where the trust it relates to no longer exists (ATO ID 2013/21). Buyers can inherit the exposure.
01
What counts as a “distribution” for Schedule 2F? There are different interpretations.
02
What is an “indirect” entitlement when deciding whether an entity is in the family group?
03
Is a variation of an election retroactive?
04
When testing a variation, are historical distributions assessed as if the new individual was always the specified individual?
05
Can an election name a deceased person, and does it depend on whether they were alive in the specified year?
General information only, not tax or legal advice.
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