Always learning … Latest lesson: ‘Last Christmas’ ** by Wham is a break up song … Final Post for 2019 and Season's Greetings

With the annual leave season starting in earnest over the next couple of weeks and many advisers taking either extended leave or alternatively taking the opportunity to catch up on things not progressed during the calendar year, last week’s post will be the final one until early 2020.

Similarly, the social media contributions by both the View and Matthew will also largely take a hiatus until the New Year as from today.

Thank you to all of those advisers who have read, and particularly those that have taken the time to provide feedback in relation to posts.

Additional thanks also to those who have purchased the ‘Inside Stories – the consolidated book of posts’.

The 2019 edition of this book, containing all posts over the last year, edited to ensure every post is current, indexed and organised into chapters for each key area should be available early in 2020.

Very best wishes for Christmas and the New Year period.

** for the trainspotters, ‘Last Christmas’ (riffed for the title of today’s post) is the Wham! hit from 1986, watch the quintessential 1980s video clip.

PS: & recently I learnt why my first ever girlfriend broke up with me in grade 5 at about this time of the year back in 1986 … at the time I had just spent weeks of pocket money on a 7 inch single (you can google what this is …) by her favourite band Wham and the aforementioned single … 

Not stopping to listen to the lyrics focused on the withdrawing of the giving of true love … she broke up with me the very next day … 

When sharing the breakup story with my daughters recently and musing how I never understood why she ‘dropped’ me they quickly pointed out the stupidity of my choice of gift. Samantha Curran of Flynn Primary School Canberra (who I have not seen or spoken with since that day in December 1986) – I am sorry.

Division 149 - some genuine examples**

Last week's post explored the framework around the application of Division 149 of the 1997 Tax Act to trust owned assets acquired before 20 September 1985.

In addition to Taxation Ruling IT 2340 (profiled last week), there are some examples of factual scenarios where the Tax Office has explained its views about the application of Division 149 in relation to family trusts, the main ones of which are summarised below. As usual, if you would like copies of any of the rulings please contact me.

1. In Private Ruling Authorisation Number 1012801220820, it is confirmed that the issue of what constitutes 'one family' for the purposes of IT 2340 must be considered based on the facts of the particular case. Generally, what is described as an 'extended' family (that is, including grandparents, children, grandchildren and their spouses) will qualify as a 'family' for these purposes. Furthermore, if distributions are made to post-19 September 1985 additions to a family (for example, the birth of new family members and new persons joining a family through marriage), the 'family' distribution criteria would also ordinarily be satisfied.
2. In Private Ruling Authorisation Number: 1012191260298, it is confirmed that where a bare trust had made all distributions of income to the same person when the trust vested to that same person, the beneficial interest was not taken to have changed. In other words, the vesting of the trust did not change the majority underlying interests in the company's assets.
3. The above mentioned Private Ruling also confirmed that pursuant to subsection 149-30(4) of the 1997 Tax Act, if an ultimate owner has acquired an interest in an asset which is transferred to them as a result of the death of a person, the new owner is treated as having held the underlying interest of the former owner over the years. In other words, the new owner will 'stand in the shoes' of the former owner for the purposes of Division 149. 
4. Finally, in ATO Interpretative Decision 2011/107, the allotment of a discretionary dividend only share in a pre-CGT company to a family trust was held to have triggered Division 149. In particular, the Tax Office argued it could not be satisfied, or find it reasonable to assume, that more than 50% of the beneficial interests in the income of the company (and therefore the majority underlying interests) would be held at all times by the same ultimate owners who held such interests immediately before 20 September 1985. Arguably the decision here is an outlier in that unless there was in fact a change of 50% or more in the underlying interests based on a tracing of distributions paid on the discretionary dividend only share and then distributed via the trust, Division 149 may not in fact have been triggered.

** For the trainspotters, ‘genuine example’ is a line from the Elton John song ‘Social Disease’ from 1973.