Hello, We are looking for help around applying Section 104-70 to payments made from a unit trust to unitholders. In a simple example, a business operated via a unit trust, in the EOY accounts includes an accounting entry for leave entitlements. So in the first year, taxable income was higher, as accounting income was reduced by this provision for leave entitlements. So let's say this difference (and it was the only difference) was $50,000. Then in year two, the leave entitlement was paid, so no accounting entry, but for taxation, the amount is now claimed. So, accounting income is higher than taxable by the same $50,000. My first position is that 104-70 would apply in year two, as the accounting distribution is higher, so the trust is making a payment to the unitholders that are non-assessable. But can you take 104-70(1)(b) to apply to amounts assessed in prior years? Or does 104-70(1)(b) only apply to the current year? Because the $50,000 adjustment was in theory assessed in the first year, not the second, but a payment was made in year two that would be caught under 104-70 unless 104-70(1)(b) applied. So is there a E4 event (or a reduction into cost base) in year two, or does 104-70(1)(b) apply? If 104-70(1)(b) does apply, we have a range of questions on who and how records are to be kept, along with how allocation or matching work with more than one type of adjustment, and what happens when unitholders leave and come back. It would make more sense to make positive/negative adjustments similar to AMIT (E10)…… To assist, and part of our own research, we have found the following - private ruling 1012974011502 https://www.ato.gov.au/law/view/document?DocID=EV/1012974011502&PiT=20211116000000 so while we can only review the edited version, it appears that from this Section 104-70(1)(b) can apply to prior years payments and help in the current year. However, ATO ID 2012/63 https://www.ato.gov.au/law/view/document?DocID=AID/AID201263/00001&PiT=99991231235958 says that Section 104-70(1)(b) doesn't apply to prior periods. We are unable to rely on the private ruling, so should we ignore ATO ID 2012/63 and apply for a private ruling as they appear to have more favourable treatment? Any assistance would be much appreciated!
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