Income Tax Act 2007 section 477

Sub-fund elections under Schedule 4ZA to TCGA 1992

Section 477 sets out the income tax consequences when trustees of a settlement make a sub-fund election, so that each sub-fund is treated as a separate settlement with its own trustees, distinct from the principal settlement.

• A sub-fund election causes the sub-fund to be treated as a brand new, separate settlement created at the time the election takes effect.
• Trustees are allocated between the sub-fund settlement and the principal settlement according to which trust property they actually hold — a person cannot be treated as trustee of both unless they genuinely serve in both capacities.
• The sub-fund trustees are treated as having become absolutely entitled to the sub-fund property as against the principal settlement trustees at the relevant time.
• These rules apply across the Income Tax Acts generally, unless the context of a particular provision requires otherwise.