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Income Tax Act 2007

Section 494: Grossing up of discretionary payment and payment of income tax

1453.This section provides for the grossing up of discretionary payments and sets out the treatment of the tax deemed to have been deducted. It is based on section 687(2) of ICTA.

1454.Subsections (1) and (2) provide for the amount of the actual payment to the beneficiary to be grossed up by reference to the trust rate for the year in which the discretionary payment is made.

1455.The amount by which a payment is grossed up represents income tax. Subsections (3) and (4) provide that the beneficiary or the settlor (in a case where the discretionary payment is treated as income of the settlor), is treated as having paid the tax deemed to have been deducted.

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