The Issues Log

Section / Provision Income Tax Act 2007

HC 27 and HC 28

Section / Provision Income Tax Act 2004

HH 1(1)

Date Received

Section HH 1(1) of the ITA 2004 contained an exception for settlements of nominal amounts made by a person (“first person”) at the request of another person (“nominal settlor exception”).  Effectively the person who settled the amount would not be considered to be a settlor. Instead, the person who requested the nominal settlement be made by the first person is considered to be the settlor.

Schedule 52, Part A of the ITA 2007 provides that the equivalent section to section HH 1 (ITA 2004) is section HC 28 in the ITA 2007.

However this nominal settlor exception has been removed in the ITA 2007 and is not in the equivalent sections HC 27 or HC 28 of the ITA 2007.  This omission is not noted as an intended change in Schedule 51 on the ITA 2007.

Could you please clarify if there has been an unintended change in the legislation.

Give examples: Pursuant to section HH 1(1) of the ITA 2004, if Rodger requests David to settle $10 in trust for the benefit of Rodgers rugby club. Rodger, rather than David, is considered to be the settlor.

However, Pursuant to the ITA 2007, in this scenario, David, rather than Rodger, is considered to be the settlor.

HH 1(1)

The Income Tax Act 2007 be amended retrospectively.