The ATO [on Thursday 19.2.2015] issued Practice Statement PS LA 2015/2 outlining its practice of limiting the period within which it will raise an original trustee assessment. It notes that the practice means returns lodged by trustees are broadly exposed to similar time limits for review as other taxpayers.

  • Generally, the ATO notes that it will not issue an original trustee assessment more than 4 years after the relevant trust tax return was lodged; or
  • for the 30 June 2014 and later income years, more than 2 years after lodgment if the trust was a small business entity (and none of the qualification in item 3 of the table in s 170(1) of the ITAA 1936 apply).

DATE OF EFFECT: Applies from 19 February 2015.

[LTN 33, 19/2/15]

The Tax Office has issued Practice Statement Law Administration PS LA 2015/2 explaining the ATO’s practice of limiting the time in which the ATO will raise an original income tax assessment for a trustee.

The practice statement notes that where a trust tax return shows no trustee tax liability (whether under s 98, 99 or 99A of the ITAA 1936), the ATO does not, as a matter of course, issue any nil assessments to the trustee to reflect the position as returned. It goes on to note that, strictly, this means that time does not begin to run for a period of review (in respect of any assessment) and the Commissioner has an unlimited period within which to review and assess the trustee’s tax position. This is not consistent with the outcome contemplated by the Report Aspects of Income Tax Self Assessment, a document released by Treasury in 2004, that taxpayers returning a nil liability should have a limited period of review.

It is ATO practice to limit the period within which the ATO will raise an original trustee assessment. This practice means that returns lodged by trustees are broadly exposed to similar time limits for review as other taxpayers.

For any income year, a trustee may be issued separate assessments under s 98 for each relevant beneficiary and/or an assessment under s 99A or 99. The ATO’s practice about time limits applies separately to the making of each of these original assessments.

The practice statement says that an original trustee assessment should not be issued where:

  • more than four years after the relevant trust tax return was lodged; or
  • for the income year ended 30 June 2014 and later income years, more than two years after lodgment if the trust is a small business entity for that year and none of the qualifications in item 3 of the table in s 170(1) of ITAA 1936 apply.

The time limits on issuing assessments do not apply:

  • if the trustee has not lodged a trust return for the year in question;
  • if the Commissioner is of the opinion that there has been fraud or evasion;
  • where an extended or unlimited amendment period would apply; or
  • where the time limit is extended.

Source: Tax Office website, 19 February 2015.

[IT 19/2/15]

Extracts from the ITAA 1936

6. Interpretation

(1)  In this Act, unless the contrary intention appears:

“assessment” means:

(d)      for a taxpayer that is the trustee of a trust estate (other than a trustee to which paragraph (b) or (c) applies or the trustee of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust)–the ascertainment:

(i)      of so much of the net income of the trust estate as is net income in respect of which the trustee is liable to pay tax (or that there is no net income in respect of which the trustee is so liable); and

(ii)     of the tax payable on that net income (or that no tax is payable); and

(iii)    of the total of a taxpayer’s tax offset refunds for a year of income (or that the taxpayer can get no such refunds for the year of income);

171A   Where no notice of assessment served

(1)  Where a taxpayer has duly furnished to the Commissioner a return of income, or of profits or gains of a capital nature, and no notice of assessment in respect thereof has been served within 12 months thereafter, the taxpayer may in writing by registered post request the Commissioner to make an assessment.


(2)  If within 3 months after the receipt by the Commissioner of the request, a notice of assessment is not served upon the taxpayer, any assessment issued thereafter in respect of that income, or of those profits or gains, shall be deemed to be an amended assessment, and for the purpose of determining whether such amended assessment may be made, the taxpayer shall be deemed to have been served on the last day of the 3 months with a notice of assessment in respect of which income tax was payable on that day.

174. Notice of assessment

(1)  As soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof in writing by post or otherwise upon the person liable to pay the tax.

(3)  In subsection (1), tax includes additional tax under Part VII.

FJM Note:

The ‘nil assessment’ changes made to the definition of ‘assessment’ in s6(1) of the ITAA 1936, and in particular paragraph (d)(i) set out above, mean that the Commissioner has made an ‘assessment’ when he accepts that a trustee, in accordance with the return it lodges, is not assessable on any of the ‘net income of [that] trust estate’. As a result, a Notice of Assessment should issue under s174 of the ITAA 1936 and if he fails to do so within 12 months, the taxpayer can give notice to the Commissioner requiring he issue a notice of assessment under s171 of the ITAA 1936. This section provides that the Commissioner will be deemed to have made an assessment at the end of a period of 3 months, which in turn will set the limitation periods running, in which the Commissioner can then amend that ‘assessment’.